Avery  Architectural  and  Fine  Arts  Library 
Gift  of  Seymour  B.  Durst  Old  York  Library 


PCTC 


■»  .»■  *»■  ■■  ■  »■' 


LIBRARY  OF  J.  PIERPONT  MORGAN 

The  building  was  in  course  of  construction  from  1903  to  1905, 
the  architects  being  Messrs.  McKim,  Mead  &  White.  In  this 
structure,  Mr.  Morgan  assembled  many  of  his  choicest  manu- 
scripts, early  prints,  and  other  treasures.  Several  of  the  rooms, 
however,  were  fitted  up  for  business  purposes,  and  it  was  here  that 
Mr.  Morgan  conducted  most  of  his  business  conferences  during 
the  latter  years  of  his  life,  the-  most  famous  of  them  being  those 
held  during  the  panic  of  1907  and  at  the  time  of  the  suspension  of 
the  Carnegie  Trust  Co.,  in  191 1. 


ffi 


THE    PROGRESS    OF   THE 
EMPIRE   STATE 

A   WORK  DEVOTED  TO  THE  HISTORICAL,  FINANCIAL, 

INDUSTRIAL,  AND  LITERARY  DEVELOPMENT 

OF  NEW  YORK 


EDITED    BY 

CHARLES    A.    CONANT 

AUTHOR    OF    "A   HISTORY  OF  MODERN  BANKS  OF  ISSUE,"  "THE    PRINCIPLES  OF  MONEY 

AND   BANKING,"  ETC. 


VOLUME  I. 
NEW  YORK  STATE  AND  CITY 


PUBLISHED    BY 

THE    PROGRESS   OF  THE   EMPIRE   STATE   COMPANY" 

NEW  YORK 


1913 


3l^ 


\A 


Copyright,  1913 

BY 

CHARLES    A.    CONANT 

Chapter  IX.  Specially  Copyrighted  by 
LOUIS   WINDMULLER 


Ube  ftnictterbocftec  press,  Hew  Boris 


ADVISORY  COMMITTEE  AS  CONSTITUTED  AT  THE 
INITIATION  OF  THE  WORK 

*J.  Pierpont  Morgan. 
Alton  B.  Parker. 
Lyman  J.  Gage. 

*  Cornelius  N.  Bliss. 
Morgan  J.  O'Brien. 
Perry  Belmont. 

J.  Van  Vechten  Olcott. 
Paul  D.  Cravath. 

*  Isidor  Straus. 

S.  R.  Guggenheim. 
Joseph  French  Johnson. 

*  Deceased. 


m 


SUBSCRIBERS  FORTHE  "PROGRESSOFTHE  EMPIRE  STATE" 


Among  those  ordering  copies  of  this  work  are  the  following: 

ORDERS  IN   BUFFALO 


Edward  D.  Adams 

American  Bankers'  As- 
sociation 

American    Bank    Note 
Company 

Frank  B.  Anderson 

*John  Jacob  Astor 

Jules  S.  Bache 

Perry  Belmont 

♦Cornelius  N.  Bliss 

N.  F.  Brady 

Joseph  H.  Bromley 

Irving  T.  Bush 

Henry  W.  Cannon 

James  G.  Cannon 

John  Claflin 

*Grover  Cleveland 

Louis  A.  Coolidge 

William  E.  Corey 

George  B.  Cortelyou 

Paul  D.  Cravath 

William  A.  Day 

M.  S.  Driggs 

H.  B.  Drought 

Henry  W.  Eaton 

Henry  Evans 

Stuyvesant  Fish 

Lyman  J.  Gage 

Frank  S.  Gannon 

German-American     In- 
surance Company 

Alexander  Gilbert 

Daniel  Guggenheim 

J.J.  Guile 

H.O.  Havemeyer  Estate 

Henry  Hentz 

A.  Barton  Hepburn 

Myron  T.  Herrick 

Frederic  B.  Jennings 

A.  D.  Juilliard 

Walter  Kutzleb 

Ladenburg,    Thalmann 
&  Company 

Gustav  Lindenthal 

Littleford,     James, 
Foster,  &  Porter 

Philip  Lydig 

•Deceased  since  giving 


Franklin  MacVeagh 
J.  B.  Martindale 
Eugene  Meyer,  Jr. 
Seth  M.  Milliken 
*D.  O.  Mills 
Mrs.    John    Murray 

Mitchell 
F.  D.  Mollenhauer 
*J.  Pierpont  Morgan 
James  R.  Morse 
Henry  W.  Munroe 
N.  Y.  Stock  Exchange 
Walter  G.  Oakman 
Alton  B.  Parker 
George  Foster  Peabody 
George  W.  Perkins 
Henry  Clay  Pierce 
James  H.  Post 
A.  A.  Raven 
E.  G.  Richards 
Allan  A.  Ryan 
Thomas  F.  Ryan 
Russell  Sage  Estate 
Charles   A.  Schieren, 

Jr. 
Jacob  H.  Schiff 
Mortimer  L.  Schiff 
J.  G.  Schmidlapp 
Isaac  N.  Seligman 
*George  P.  Sheldon 
Theodore  P.  Shonts 
Samuel  Sloan 
Howard  C.  Smith 
Elbridge  G.  Snow 
Samuel  Spencer  Estate 
Maurice  M.Sternberger 
Willard  Straight 
*lsidor  Straus 
Alvah  W.  Sulloway 
Henry  R.  Towne 
H.  H.  Vreeland 
Paul  M.  Warburg 
Silas  D.  Webb 
William  E.  Wheelock 
Clarence  Whitman 
Harry  Payne  Whitney 
Louis  Windmuller 
order. 


Lewis  J.  Bennett 
Buffalo     Historical 

Society 
Buffalo  Public  Library 
*S.  M.  Clement 
Inconge  Clinton 
Walter  P.  Cooke 
William  B.  Cutter 
Robert  S.  Donaldson 
Mrs.  F.  H.  Goodyear 
F.  C.  Gratwick 
Mrs.  W.  H.  Gratwick 
Chauncey  J.  Hamlin 
William  B.  Hoyt 
E.  H.  Hutchinson 
Dudley  M.  Irwin 
Seymour  H.  Knox 
John  D.  Larkin 
Josiah  Letchworth 
Franklin  D.  Locke 
Darwin  D.  Martin 
George  B.  Mathews 
*George  E.  Matthews 
Isidore  Michael 
Adelbert  Moot 
Charles  J.  North 
Eugene  O.  Roberts 
William  A.  Rogers 
John  A.  Scatcherd 
Hans  Schmidt 
J.  F.  Schoellkopf 
Walter  S.  Schoellkopf 
*T.  Guilford  Smith 
Ansley  Wilcox 
T.  B.  Crary 
Thomas  R.  Proctor 
M.  B.  Shantz 
Arthur  G.  Yates 


FOREIGN  SUBSCRIBERS 

Gideon  M.  Boissevain, 

Amsterdam,  Holland. 

M.  L.  Dorizon, 

Societe  Generate,  Paris. 

Sir  Edward  Holden, 

London  City  &  Midland  Bank, 
London. 

Mrs.  Emil  Oelbermann, 
Cologne. 

M.  Charles  Poirson, 

Union  Parisienne,  Paris. 

M.  L.  Van  der  Rest, 

National  Bank  of  Belgium, 
Brussels. 

Yokohama  Specie  Bank. 


VI 


CONTENTS  OF  THIS  VOLUME 

CHAPTER  PACK 

1. — Planting  and  Growth  of  the  Empire  State   .         .         i 
By  Ellis  H.  Roberts 

II. — The  Influence  of  New   York  in  National  Affairs       51 
By  Perry  Belmont 

III. — The  Financial  Development  of  New  York     .         .       59 
By  Charles  A.  Conant 

IV. — New  York  and  the  National  Finances  .         .         .      109 
By  James  G.  Cannon 

V. — The  Era  of  Industrial  Expansion  .         .         .147 

By  Alexander  D.  Noyes 

VI. — The  Development  of  Industrial  Combination         .     187 
By  Jeremiah  W.  Jenks  and  William  H.  Lough 

VII. — The  Crisis  of  1907  ......     227 

By  George  B.  Cortelyou 

VIII. — History  of  the  New  York  Stock  Exchange  .         .     261 
By  Sereno  S.  Pratt 

IX. — The  Commercial  Progress  of  Gotham     .         .         .311 
By  Louis  Windmuller 

X. — Development  of  the  Periodical  Press    .         .         .381 
By  Elizabeth  Jordan 

Index       .........     413 


LIST  OF  PLATES  IN  THIS  VOLUME 


FACING    PAGE 


Library  of  J.  Pierpont  Morgan 

Ellis  H.  Roberts 

Theodore   Roosevelt 

John  Jacob  Astor 

James  S.  T.  Stranahan 

James  A.  Burden 

Silas   D.  Webb 

Cornelius  N.  Bliss   . 

Lyman  J.  Gage  . 

Perry   Belmont 

William  C.  Whitney 

Charles  A.  Conant  . 

August  Belmont 

J.   Pierpont  Morgan 

Col.  John  Jacob  Astor 

Thomas  F.  Ryan 

Samuel  Sloan    . 

Isaac  N.  Seligman     . 

James  R.  Morse 

Bush  Terminal  Plant 

James  G.  Cannon 

A.  Barton  Hepburn  . 


Frontisp 


tece. 


i 
•3 
19 
25 
3' 
35 
39 
45 
5i 
55 
59 
65 
7> 
77 
81 

87 

93 

99 

105 

109 

115 


LIST  OF  PLATES  IN  THIS  VOLUME 


FACING    PAGB 


John  Claflin     . 
Isidor  Straus     . 
John  Murray  Mitchell 
Irving  T.  Bush 
Alexander  D.  Noves 
Meyer  Guggenheim   . 
Stuyvesant  Fish 
Theodore  P.  Shonts 
John  Stanton     . 
Home  of  Thomas  F.  Ryan 
William  A.  Day 
Jeremiah  W.  Jenks    . 
Henry  O.  Havemeyer 
James  H.  Post  . 

F.    D.    MOLLENHAUER   . 

Anthony  N.  Brady    . 
Daniel  Guggenheim  . 
Solomon  R.  Guggenheim 
George  B.  Cortelyou 
Augustus  D.  Juilliard 
Morgan  Office  Building 
Seth  M.  Milliken 
H.  H.  Vreeland 
Charles  C    Dickinson 
The  New  York  Stock  Exchange 
Russell  Sage     . 
Henry  Clay  Pierce  . 
George  W.  Perkins  . 
Jules  S.  Bache 


123 
129 
137 
'43 
147 
153 
159 
.65 
171 

•77 
183 
.87 
193 
199 
205 
209 
215 
221 
227 

233 
239 
245 
251 

257 
261 
267 

273 
279 
285 


LIST  OF  PLATES  IN  THIS  VOLUME 


XI 


Samuel  Spencer 
William  A.  Wheelock 
William  E.  Corey 
Smelting  Plant  at  Garfi 
Louis  Windmuller     . 
Henry  B.  Claflin 
Clarence  Whitman    . 
Alfred  Van  Santvoord 
William  B.  Astor 
Emil  Oelbermann 
Henry  W.  Eaton 
J.  J.  Guile 
William  Astor  . 
Woolworth  Building 
Elbridge  Gerry  Snow 
Anton  A.  Raven 
E.  G.  Richards 
Elizabeth  Jordan 
Edward  P.  Bryan 
Marshall  S.  Driggs 
Henry  Evans     . 

GUSTAV    LlNDENTHAL 

George  P.  Sheldon 


ld,  Utah 


FACING  PACK 
291 
297 
301 
307 

3i« 

317 
321 

325 
331 

335 
339 
345 
35" 
357 
363 
369 

375 
381 
387 
393 
399 
403 
409 


INTRODUCTION 

THE  purpose  of  this  work  is  chiefly  to  record  the  prog- 
ress of  the  city  and  State  of  New  York  within 
the  past  generation.  The  foundations  of  this  prog- 
ress date  back  to  the  settlement  of  New  Amsterdam  and 
the  geographical  position  of  the  colony  between  the  Eastern 
States  and  other  portions  of  the  Union.  It  is  not  the  pur- 
pose of  this  work  to  ignore  the  part  played  by  these  events 
of  our  early  history  in  building  up  the  New  York  of  to-day; 
but  it  is  this  story  of  to-day — of  the  present  generation  and 
of  that  which  went  before — to  which  it  is  chiefly  devoted. 
Events  have  moved  so  rapidly  within  these  generations 
that,  from  the  industrial  and  financial  point  of  view,  out 
of  the  old  New  York  have  developed  a  new  State  and  a 
new  city. 

The  history  of  the  city  and  State  of  New  York  is  in 
many  respects  an  epitome  of  the  history  of  the  American 
people.  From  the  political  point  of  view.  New  York  was 
a  dominant  factor  almost  from  the  beginning  of  the  history 
of  the  Colonies.  The  Revolution  could  hardly  have  been 
brought  to  a  successful  issue  without  the  cooperation  of  her 
loyal  people,  and  it  was  their  adhesion  which  made  possible 
the  Union  of  1789.  The  finances  of  the  nation  could  not 
have  been  put  upon  a  sound  basis  and  American  credit 
raised  to  the  level  of  that  of  other  civilized  peoples  without 
the  services  of  New  York's  foremost  citizen,  Alexander 
Hamilton,  and  of  the  moneyed  interests  which  lent  him  sub- 
stantial support.     And  through  the  stress  of  civil  war,  it 


xiv  PROGRESS  OF  THE   EMPIRE   STATE 

was  largely  the  loyal  hearts  and  open  purses  of  the  business 
men  of  New  York  that  made  certain  the  triumph  of  the 
Union.  If  Virginia  in  the  early  days  was  "the  mother  of 
Presidents,"  New  York  became  by  the  strong  character 
of  her  political  leaders  and  her  large  population  "the  pivotal 
State"  in  presidential  elections  and  so  remained  almost 
without  interruption,  from  the  days  of  Jackson  to  those  of 
Taft  and  Wilson. 

It  is  principally  with  material  and  economic  progress, 
however,  rather  than  political,  that  this  work  will  deal. 
The  State  of  New  York  has,  with  slight  variations,  contained 
from  the  beginning  of  the  Union  from  a  twelfth  to  a  tenth 
of  the  population  of  the  country.  This  population  grew  in 
the  case  of  the  State  from  340,120  in  1790  to  9,113,279  in 
1910,  while  for  the  Union  as  a  whole  it  grew  from  3,929,214 
to  91,972,267.  New  York  was  not  the  dominating  factor 
among  the  States  in  population  in  1790,  however,  which 
she  has  since  become;  for,  while  she  possessed  then,  as  now, 
about  one  twelfth  of  the  population  of  the  Union,  the  other 
eleven  twelfths  was  in  1790  concentrated  in  less  than 
twenty  States  instead  of  divided  among  forty-eight  States, 
as  at  the  present  time.  At  the  census  of  1790,  the  popu- 
lation of  Virginia  was  747,610,  or  more  than  twice  that  of 
New  York,  and  the  Empire  State  was  surpassed  in  the  num- 
bers of  her  people  by  Pennsylvania,  with  434,373  inhabi- 
tants; by  Massachusetts  with  378,787;  and  even  by  North 
Carolina,  with  393,751.  It  was  not  until  1810  that  New 
York  attained  second  rank  among  the  States  in  population, 
and  it  was  not  until  1820  that  she  surpassed  Virginia  and 
attained  the  first  rank,  which  she  has  since  securely  held. 

The  best  proof  of  the  position  of  the  city  of  New  York 
as  the  economic  center  of  the  United  States  is  found  in  the 
flocking  to  the  city  of  people  of  other  States.  Men  of  brains 
and  large  ideas  have  been  drawn  by  an  almost  irresistible 


INTRODUCTION  xv 

magnet  to  the  city  which  has  become  the  depository  of 
capital,  the  center  of  exchanges,  and  the  moving  force  in  all 
the  great  enterprises  which  in  America  give  form  and  sub- 
stance to  civilized  life.  Of  the  population  of  9,113,614  in 
the  State  of  New  York,  in  1910  6,355,376  were  born  in  the 
country,  but  only  5,647,063  in  the  State  itself.  More  than 
half  a  million  of  her  people  are  immigrants  from  other  States, 
Pennsylvania  alone  furnishing  165,232,  New  Jersey  99,068, 
Massachusetts  60,900,  Connecticut  43,882,  Virginia  40,856, 
Ohio  34,913,  and  Maryland  17,360. 

The  predominance  of  New  York  in  the  American  Union 
at  the  beginning  of  our  history  would  not  have  signified  much 
in  comparison  with  larger  cities  in  other  countries.  When 
Wall  Street  marked  the  upper  limits  of  the  thickly  settled 
portion  of  the  city,  and  aristocratic  farms  were  found  in  the 
neighborhood  of  Washington  Square,  New  York  was  a 
negligible  factor  in  the  finance  of  the  world.  She  was  over- 
shadowed by  London,  Paris,  Berlin,  Antwerp,  Amsterdam, 
Hamburg,  Vienna,  Frankfort,  and  other  centers  of  the  ten- 
century  old  civilization  of  Europe.  To-day,  only  one  city  in 
the  world  surpasses  New  York  in  population;  only  two 
compete  with  her  in  the  magnitude  of  their  enterprises,  the 
completeness  of  their  commercial  machinery,  and  the  ac- 
cumulation of  wealth  which  is  reflected  in  their  brilliant 
cosmopolitan  life. 

The  population  of  Greater  London  in  1904  was  6,907,756; 
of  Paris  in  1901,  2,714,068;  and  of  Greater  New  York  in 
1910,  4,766,883.  This  increase,  which  has  been  going  on  in 
recent  years  at  the  rate  of  about  100,000  inhabitants  per 
year,  adding  a  new  population  the  size  of  that  of  Boston  or 
Baltimore  every  five  years,  explains  in  a  measure  the  magni- 
tude of  the  local  transportation  problem  and  the  part  which 
it  has  played  in  the  financial  history  of  the  city.  The  first 
subway  had  hardly  been  opened  in  the  autumn  of  1904 


xvi  PROGRESS  OF  THE   EMPIRE   STATE 

when  traffic  grew  up  to  its  increased  facilities  and  within 
three  years  congestion  again  became  acute.  Some  idea  of 
the  proportions  of  this  traffic  may  be  gathered  from  the  fact 
that  the  number  of  passengers  carried  on  the  local  trans- 
portation lines  of  the  State  in  1902  was  1,144,509,000,  which 
was  nearly  one-fourth  of  the  total  number — 4,774,211,904 
— carried  on  similar  lines  in  the  entire  United  States.  On  the 
local  lines  of  New  York  alone  were  carried  more  passengers 
by  more  than  60  per  cent,  than  the  649,878,505  persons  who 
were  carried  on  all  the  steam  railway  lines  of  the  country. 

Rapidly  as  New  York  has  grown  in  population,  she  has 
grown  still  more  rapidly  in  wealth  and  in  her  control  of  the 
accumulated  resources  of  the  nation.  Her  total  wealth, 
as  computed  by  the  Census  Bureau,  was  #6,308,000,000 
in  1880,  and  advanced  to  #8,576,701,991  in  1890  and  to 
#14,769,042,207  in  1904.  These  figures,  however,  represent 
the  visible  physical  property  in  the  State  and  only  partly  in- 
clude the  great  share  which  New  Yorkers  have  acquired  in 
the  control  of  property  in  other  States.  This  control,  which 
it  must  be  left  for  later  chapters  of  this  work  to  set  forth 
fully,  is  the  natural  result  of  the  position  of  the  State  as  the 
channel  of  commerce  between  the  West  and  the  outer 
world  and  the  function  of  the  city  of  New  York  as  the  center 
of  exchanges.  To  that  city  which  has  been  the  gateway  of 
commerce  and  the  center  of  exchanges  has  come  in  all  ages 
the  control  and  distribution  of  the  national  wealth,  whether 
to  Nineveh,  Tyre,  Athens,  or  Rome  in  ancient  times;  to 
Venice,  Florence,  Lyons,  Bruges,  Amsterdam,  or  Novgorod 
in  the  medieval  world;  or  to  London,  Paris,  or  Hamburg 
in  the  world  of  to-day. 

The  city  and  State  of  New  York  have  become,  especially 
during  the  last  two  decades,  a  gateway  through  which  passes 
the  commerce  of  the  nation.  The  commercial  supremacy 
which  the  Erie  Canal  created,  the  railways  have  continued. 


INTRODUCTION  xvn 

In  round  figures,  more  than  one  third  of  the  exports  of 
merchandise  from  the  United  States  and  more  than  half 
of  the  imports  pass  through  the  gateway  of  New  York. 
Exports  of  merchandise  from  the  United  States  for  the 
fiscal  year  191 1  were  #2,049,320,199.  Of  this  amount, 
$772,552,449  went  from  the  port  of  New  York.  Imports 
of  merchandise  were  $1,527,226,105,  and  of  this  amount 
$881,592,689  entered  through  New  York.  To  these  totals 
Buffalo,  Champlain,  Oswegatchie,  Oswego,  Genesee,  and 
Niagara  added  about  $104,000,000  in  exports  and  $50,000,- 
000  in  imports. 

Inevitably,  in  order  to  finance  such  large  operations, 
banking  capital  and  enterprise  have  come  more  and  more  to 
be  concentrated  in  the  commercial  capital  of  the  Empire 
State.  New  York  has  gradually  gathered  within  her  strong 
hands  the  finances,  the  management,  the  control  of  most  of 
the  great  enterprises  of  the  country.  Railway  systems  which 
formerly  had  their  head  offices  in  Boston  or  the  West  have 
come  to  New  York.  The  resources  of  six  great  systems 
alone,  amounting  to  nearly  $7,000,000,000,  represent  more 
than  half  of  the  railway  capital  of  the  country.  The  head 
offices  of  most  of  the  great  industrial  combinations  are  in 
New  York.  The  transactions  to  which  the  country  looks 
as  a  guide  to  values  are  those  on  the  Stock  Exchange  of 
New  York.  The  barometer  of  changes  in  financial  condi- 
tions is  found  in  the  weekly  statements  of  the  Associated 
Banks  of  New  York.  The  great  engineering  feats  of  the 
age— spanning  the  East  River  with  great  bridges,  tunneling 
under  the  majestic  Hudson,  construction  of  subways  of 
many  miles,  sinking  the  foundations  of  giant  skyscrapers 
down  into  the  bowels  of  the  earth,  and  adjustment  of 
sewerage,  water,  and  lighting  equipment  to  the  congested 
needs  of  a  city  of  four  millions  of  people — have  had  their 
inception  and  their  consummation  in  the  city  of  New  York. 


xviii  PROGRESS  OF  THE   EMPIRE   STATE 

Even  the  great  educational,  literary,  artistic,  and  charitable 
foundations  which  are  the  product  of  the  ripened  life  of  a 
people  have  received  their  richest  dowry  from  the  generosity 
of  New  Yorkers. 

It  is  within  the  past  generation,  almost  within  the  past 
decade,  that  New  York  has  forced  her  way  into  the  front 
rank  in  international  money  markets.  It  cannot  yet  be 
said  that  she  stands  abreast  of  London  or  Paris  in  the  inter- 
national character  of  her  transactions.  She  is  too  much 
absorbed  in  home  affairs.  In  some  respects  this  is  a  sign 
of  healthy  life  rather  than  lack  of  financial  power.  The 
capital  produced  in  the  United  States  is  so  urgently  needed 
for  the  development  of  our  own  unbounded  acres/and  brings 
such  returns  when  invested  in  American  enterprises,  that  it 
does  not  need  to  seek  foreign  fields,  like  the  accumulated 
savings  of  Great  Britain,  France,  Belgium,  the  Netherlands, 
and  other  European  countries.  Hence,  only  a  few  foreign 
securities  are  dealt  with  on  the  New  York  market,  and  while 
the  volume  of  her  transactions  gains  steadily  upon  that  of 
her  great  rivals  in  Europe,  the  Empire  City  has  yet  to  become 
in  the  true  sense  of  the  word  an  international  market. 

This  fact,  however,  does  not  detract  from  the  great  prog- 
ress of  the  last  few  years.  More  and  more  as  American 
commerce  has  expanded,  it  has  choked  and  enlarged  the 
gateway  through  which  it  has  passed.  From  the  greatest 
exporter  of  food  products,  the  United  States  has  (been  forc- 
ing herself  into  the  position  of  one  of  the  greatest  manu- 
facturing exporters  of  the  world.  Inevitably,  such  a 
volume  of  transactions  carries  with  it  the  necessity  for  a 
great  financial  machinery.  Invention  followed  invention 
in  the  field  of  labor-saving  devices  during  the  early  years 
after  the  Civil  War.  Presently,  invention  and  its  products 
overtook  and  passed  the  old  methods  of  conducting  ex- 
changes— the  local  railway  lines,  the   isolated    individual 


INTRODUCTION  xix 

banker.  Invention,  combination,  enlargement,  became  vital 
in  the  financial  field,  as  they  had  been  in  the  field  of  farm- 
ing and  manufacturing  machinery,  if  the  means  of  carrying 
on  exchanges  were  not  to  break  down  under  the  weight  im- 
posed upon  them.  Hence  came  that  wonderful  era  of  com- 
bination in  finance  which  has  excited  so  much  criticism  and 
which,  like  all  great  forward  movements,  coupled  abuses 
and  exaggerations  with  its  tremendous  services  and  benefits. 

It  is  the  story  of  this  growth  which  it  is  the  purpose  of 
this  volume  to  tell.  It  is  a  story  recorded  nowhere  else  in 
complete  form,  because  the  work  itself  is  largely  the  achieve- 
ment of  yesterday  rather  than  of  a  time  long  gone.  To  the 
service  of  recounting  these  achievements  has  been  brought 
the  services  of  many  of  the  men  who  have  borne  the  burden 
and  heat  of  the  day  in  the  doing  of  them  and  of  those  also 
who  have  looked  on  as  students  and  sometimes  as  critics. 
If  their  work  has  been  well  done,  their  story  will  be  throb- 
bing with  the  pulsing  life  of  the  New  York  of  to-day.  The 
portraits  which  are  presented  will  be  those  of  men  of  ac- 
tion, not  of  talkers  or  dreamers,  but  of  those  whose  achieve- 
ments justify  the  forceful  words  applied  to  the  greatness  of 
Grant, — that  he  was 

"Great  in  the  arduous  greatness  of  things  done." 


ELLIS  H.  ROBERTS 

Writer  and  publicist  born  of  Welsh  parentage  in  Utica,  N.  Y., 
mber  30,  1827  -VT  while  a  lad.     In 

Yale  College,  took  prizes  for  English  composition,  for  Townsend 
prize  essay,  for  Bristed  scho]  d  by  his  classmates 

first  editor  of  Yale  Literary  Magazine;  graduated  in  1850  second 
in  merit  in  his  class.     Principal  1  Academy,  1850-1851; 

editor   of    Utica    Herald,    1850-18-  iber   of    New   York 

atative  in  Congress,  1871-1875,  serving 
on    Committee    of    Ways    and    Mean.  nl     treasurer    of 

resident  of  Franklin 
■rial    Bank,    New   York,    1893-1897;     treasurer    - 
States,  1897   [905.     Married  Elizabeth  Morris  1 85 1,  who  died  in, 
Washington,   1).  ('.,  July  21,  1903.      President  Oneida  Historical 
Society  and  Fort   Schuyler  (  a,   X.   Y.;  president  St. 

David's  Society,  Phi  Beta  Alumni,  and  Patria  Club,  New  York; 
LL.D  from  Yale  and  Hamilton.  Addresses  delivered  before 
American  Bankers'  Association  and  Bankers'  Associations  of 
many  States.  Author  of  Government  Revenue  and  Planting  and 
Growth   of  Empire  State. 


1 


Progress  of  the  Empire  State 


CHAPTER  I 

PLANTING  AND  GROWTH  OF  THE  EMPIRE 

STATE 

BY  ELLIS  H.  ROBERTS 

THREE  nations  of  Europe  in  the  early  days  claimed 
title  to  the  domain  now  New  York.  The  French, 
on  the  strength  of  the  discovery  of  the  St.  Lawrence 
by  Giovanni  da  Verrazano  on  the  day  of  that  saint  in  1508, 
reached  out  to  the  sources  of  the  streams  flowing  from  the 
south  into  Lake  Ontario  as  well  as  into  that  great  river,  and 
especially  alleged  that  he  visited  New  York  Bay  in  1524. 
The  English  grasped  the  Atlantic  Coast  from  Nova  Scotia 
to  Florida  and  inland  without  limit,  by  virtue  of  the  dis- 
covery of  the  continent  by  the  Cabots  in  1497.  The  Dutch 
frankly  entered  unoccupied  lands  "by  deed  of  seizure," 
which  hardly  differed  from  the  title  of  their  rivals.  The  red 
men  saw  little  choice  between  these  suitors.  Soon  enough 
they  felt  the  heavy  hands  of  each  of  them. 

A  fourth  claimant  might  appear  in  Spain  under  the 
bull  of  Pope  Alexander  VI.  who  gave  to  her  all  America,  but 
Charles  V.  was  kept  busy  nearer  the  tropics.  A  map  of 
1529  styles  the  region  about  the  bay  the  "Land  of  Gomez," 


2  PROGRESS  OF  THE  EMPIRE  STATE 

because  a  Portuguese  of  that  name  discovered  the  bay  in 
1525  under  the  flag  of  the  same  Emperor. 

New  York  was  to  be  fashioned  by  the  struggles  of  Dutch 
and  French  and  English  with  each  other  and  with  the  red 
men.  Her  area,  with  shadowy  limits  at  the  start,  was  clipped 
by  repeated  excisions  to  47,620  square  miles,  lying  between 
north  latitude  400  29'  40"  and  450  o'  42"  and  longitude 
710  51'  and  790  45'  54"  west.  The  extreme  lines  are  311! 
miles  from  north  to  south  and  412  miles  from  east  to  west. 
Mountains,  belonging  to  the  Appalachian  system,  and 
between  them  rivers  and  lakes  with  their  fertile  valleys,  are 
the  main  features.  The  single  gateway  from  east  to  west  is 
by  the  Mohawk  Valley. 

A  marked  asset  of  the  domain  is  its  natural  waters. 
Its  boundaries  are  in  great  part  lakes,  of  which  879  miles  are 
navigable.  A  strait  of  the  sea  sets  off  Long  Island,  and  the 
broad  bay  invites  navigation.  The  inland  lakes,  varying 
in  extent,  are  counted  by  hundreds.  The  streams,  with  a 
general  course  to  the  north  and  south,  flow  to  all  points 
of  the  compass.  Some,  as  branches  of  the  Mohawk  and  the 
Hudson,  discharge  into  the  ocean  through  the  bay;  many 
find  their  way  by  Lake  Ontario  and  the  St.  Lawrence 
northeastward;  and  thither  also  Lake  Champlain  carries  its 
affluents.  The  Susquehanna  flows  to  Chesapeake  Bay,  and 
Delaware  Bay  receives  many  streams.  Cattaraugus  Creek 
finds  its  outlet  in  Lake  Erie,  while  the  Allegheny  runs  into 
the  Ohio  and  thus  into  the  Mississippi  and  the  Gulf  of 
Mexico.  The  factory  and  the  electrician,  as  well  as  the 
artist,  meet  with  no  lack  of  waterfalls,  while  the  islands  in 
sea,  lake,  and  river  are  abundant,  and  not  the  least  among 
the  gifts  of  nature. 

In  the  era  of  Columbus,  and  when  the  French  and  the 
Dutch  came  in,  five  nations  of  red  men  held  the  country 
inland  and  bore  sway  over  minor  tribes  near  the  Hudson  and 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE       3 

the  sea.  They  built  cabins,  tilled  the  soil,  raising  wheat  and 
maize,  kept  orchards  bearing  several  kinds  of  fruit,  and 
their  tribal  organizations  were  joined  in  a  confederacy. 
The  French  called  them  Iroquois.  They  numbered  about 
twelve  thousand.  Their  canoes  were  familiar  on  distant 
as  well  as  near-by  waters.  They  were  noted  hunters  and 
collected  furs  from  far  regions.  Their  prowess  in  war  carried 
terror  to  their  enemies  to  all  quarters.  They  impressed 
the  early  settlers  by  their  skill  in  trade  and  their  shrewdness 
in  diplomacy,  while  as  orators  some  of  their  chiefs  have  been 
ranked  by  critics  with  the  classic  masters. 

Not  until  one  hundred  and  twelve  years  after  Cabot's 
report,  and  eighty-five  years  after  Verrazano's  vision  of  the 
bay,  did  white  men  drop  here  the  first  seed  of  settlement. 
The  domain  lay  barren  for  these  generations.  Jamestown 
had  been  planted  in  1607.  Plymouth  was  not  to  receive 
the  Pilgrims  of  the  Mayflower  until  1620.  Samuel  de 
Champlain,  the  first  governor  of  New  France,  was  enticed 
by  the  red  men  about  Montreal  >to  join  them  in  a  raid  of 
revenge  against  the  Iroquois,  and  in  July,  1609,  he  and  his 
allies  gained  transient  triumph  on  the  banks  of  the 
lake  which  bears  his  name.  In  another  raid  six  years 
later,  near  Oneida,  he  was  defeated  and  forced  to  retreat. 

Two  months  after  Champlain's  first  invasion,  the  Half- 
Moon,  flying  the  flag  of  the  Netherlands,  brought  Henry 
Hudson,  September  3,  1609,  into  the  river  which  perpetuates 
his  fame.  The  next  year,  the  first  settlers  came  under 
Dutch  auspices. 

Champlain  planted  no  acorn  for  the  growth  of  an  oak. 
Armies  and  missionaries  came  to  harry  and  to  teach  the 
Iroquois;  the  soldiers,  whatever  their  daring,  hardly  left  a 
trail;  the  fathers  of  the  Cross  set  up  their  faith,  and  their 
works  do  follow  them.  The  Dutch  put  out  bulb  and  nut, 
to  grow  into  strength  and  beauty. 


4  PROGRESS  OF  THE  EMPIRE  STATE 

The  French  king  might  respond  to  the  appeals  of  the 
governors  of  Canada,  and  denounce  the  Five  Nations  as 
"perpetual  and  irreconcilable  enemies,"  as  he  did  in  1665, 
and  order  that  war  should  be  waged  "even  to  their  firesides 
in  order  totally  to  exterminate  them."  Tracy,  Courcelles, 
Talon,  De  la  Barre,  Denonville,  might  march  their  trained 
European  veterans  into  the  forests  to  learn  how  quickly  and 
how  surely  the  red  men  could  hide  in  their  fastnesses. 
Even  Frontenac,  with  skill,  experience,  and  reputation  won 
in  Italy  and  Candia,  might  burn  Schenectady,  might 
threaten  Albany,  might  surprise  Indian  castles  at  Onondaga 
and  Oneida;  but  neither  the  complacence  of  Charles  II. 
nor  the  grand  schemes  of  Louis  XIV.  could  secure  New  York 
for  the  French,  nor  crush  the  spirit  of  the  Iroquois,  to  whom 
the  wilderness  offered  escape  from  invaders,  whatever  their 
force  and  power  to  harm.  The  treaty  of  Ryswick  in  1697, 
between  England  and  France,  brought  peace  to  red  men  and 
French  as  well  as  to  the  English  colonies  which  had  been 
drawn  into  the  war. 

Meanwhile  the  Dutch  had  planted  settlements,  had 
prospered  and  suffered,  and  then  had  put  an  end  to  their 
occupation  by  surrender  to  the  English.  Adriaen  Block 
arrived  in  1616  and  came  out  again  a  year  later,  when, 
having  lost  one  of  his  ships  by  fire,  he  built  to  take  its  place 
a  vessel  which  he  named  the  Onrust  and  so  began  marine 
construction  here.  A  company  of  Amsterdam  merchants, 
with  a  charter  for  exclusive  trade  to  this  region,  entered  into 
arrangements  of  amity  with  the  red  men,  but  soon  com- 
petitors grasped  a  share  in  the  traffic.  Larger  designs  took 
shape  when  the  West  India  Company  started  with  its  world- 
wide schemes.  For  this  colony  the  first  fruits  were  the 
landing  in  1623  of  immigrants,  mostly  Walloons,  who  built 
Fort  Orange.  The  Dutch  directors  in  course  satisfied  their 
land  hunger  by  seizure  or  nominal  purchase  of  large  tracts, 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE       5 

and  the  system  of  patroons  arose  in  immense  estates. 
William  Kieft,  whose  rule  of  ten  years  as  director  ended  in 
1647,  by  stress  of  disastrous  war  with  the  Indians  caused  by 
his  own  folly,  was  forced  to  appeal  for  a  council  to  help  him. 

The  Council  of  Eight  framed  a  grave  indictment  against 
the  director  and  appealed  to  the  authorities  in  Holland. 
They  held  him  guilty  for  the  Indian  war  and  for  imposing 
taxes  without  authority;  while  they  charged  that  he  had 
falsely  stated  the  resources  and  growth  of  the  colony.  His 
removal  and  a  new  policy  were  demanded.  The  home 
authorities  accepted  the  conclusions  of  the  Eight.  He 
sailed  for  Amsterdam  with  a  fortune  of  400,000  guilders, 
large  for  those  times,  and  with  the  hatred  of  the  people,  but 
the  vessel  was  wrecked  in  the  British  Channel  and  he  was 
drowned. 

The  last  and  most  picturesque  of  the  Dutch  director- 
generals  was  Peter  Stuyvesant  (1647),  who  had  served  in 
like  station  in  Curacao.  He  inherited  the  quarrels  of  Kieft, 
but  he  was  guided  by  new  instructions,  which  ordered  him  to 
guard  against  encroachments  on  the  borders,  to  preserve 
peace  with  the  Indians,  and  to  encourage  the  settlers  to 
dwell  in  villages.  He  met  with  trouble  inside  the  colony 
and  beyond  its  borders.  The  West  India  Company,  at 
first  rich  by  capture  of  Spanish  galleons,  drifted  into  bank- 
ruptcy. Patroons  and  others  became  its  rivals  in  trade  with 
the  Indians.  The  settlers  grew  hostile  over  its  demands  for 
tribute  and  its  refusal  of  aid.  English  hamlets  on  Long 
Island  were  restive  under  the  Dutch  sway,  and  sought  a 
voice  in  administration.  Quarrels  arose  over  the  rights  and 
tenure  of  clergymen.  In  the  hope  of  relief,  a  popular  con- 
vention met  in  New  Amsterdam,  December  10,  1653,  to 
which  four  Dutch  and  four  English  towns  sent  ten  delegates 
of  Dutch  birth  and  nine  of  English  birth.  This  body 
adopted  a  remonstrance  to  the  States-General  against  the 


6  PROGRESS  OF  THE  EMPIRE  STATE 

conduct  of  the  director  and  council  in  passing  laws  and 
appointing  officers  without  consent  of  the  people  and  in 
granting  large  tracts  of  land  to  favorites.  At  the  same 
time,  Indian  outrages  were  perpetrated  at  many  points,  while 
the  New  England  colonies  were  aiming  to  oust  the  Dutch 
authorities  from  New  York. 

The  city  was  helpless  when  an  English  squadron,  sent 
in  time  of  peace  by  the  Duke  of  York  to  enforce  his  claims  to 
the  domain,  blockaded  river  and  bay,  and  its  commander, 
Colonel  Richard  Nicolls,  on  August  29,  1664,  demanded 
surrender.  Long  Island  was  in  revolt,  Massachusetts  and 
Connecticut  were  ready  to  join  in  assault,  the  fort  was 
untenable,  the  garrison  was  small  and  poorly  equipped. 
What  could  Stuyvesant  do?  Clergymen  and  men  and 
women  urged  him  not  to  give  pretext  for  bombardment  by 
the  fleet  or  attack  by  the  soldiers.  He  could  do  nothing 
but  surrender,  and  on  September  8th  the  garrison  was 
allowed  to  "march  out  with  their  arms,  drums  beating  and 
colors  flying,  and  lighted  matches." 

The  English  bore  sway  in  the  province,  which  they 
named  New  York,  for  nearly  nine  years,  until  August  7, 
1673,  a  Dutch  fleet  anchored  off  Staten  Island  and  dis- 
covered that  in  the  interval  little  had  been  added  to  the 
defenses  of  the  city.  The  guns  at  the  City  Hall  were 
spiked  by  the  inhabitants.  The  Dutch  commanders  granted 
only  half  an  hour's  delay  for  answer  to  their  summons  to 
surrender,  and  opened  their  broadsides  on  the  fort,  killing 
and  wounding  some  of  the  garrison.  The  defenders  returned 
the  fire  and  "shot  the  general's  ship  through  and  through." 
From  the  fleet  six  hundred  men  were  landed  and  were  joined 
by  four  hundred  burghers.  They  were  met  with  a  message 
that  fort  and  garrison  would  surrender  with  the  honors  of 
war.  The  Dutch  resumed  control  and  restored  the  former 
names    and    administration,    with    the   successful   Admiral 


PLANTING  AND  GROW  III  OF  THE  EMPIRE  STATE       7 

Colve  as  governor.  The  restoration  was  to  be  short;  it 
was  creditable,  but  it  was  the  end  of  Dutch  rule  on  this 
continent.  By  the  treaty  of  Westminster,  signed  Feb- 
ruary 19,  1674,  England  and  Holland,  in  making  peace, 
agreed  to  restore  to  each  other  all  lands  captured  during  the 
war,  and  this  domain  became  finally  New  York. 

When  Major  Edmund  Andros  took  possession  for  James, 
Duke  of  York,  of  the  lands  in  America  granted  to  him  by  the 
King,  the  white  inhabitants  in  Manhattan  and  Long  Island 
and  along  the  Hudson  River  did  not  number  twelve  thou- 
sand. The  fur  trade  was  a  chief  industry,  but  cattle  and 
implements  had  been  imported  to  broaden  agriculture.  A 
start  had  been  made  in  simple  manufactures.  Commerce 
in  American  waters  and  with  Europe  was  striving  for  more 
than  mere  existence.  The  neighboring  colonies,  now  that 
all  were  under  the  British  flag,  no  longer  had  pretext  of  race 
to  threaten  hostilities.  The  interests  of  New  York  ceased 
to  be  those  of  a  foreign  power,  and  its  experience  turned  into 
the  common  channel  of  the  continent. 

Yet  the  Duke  of  York  and  the  governors  who  acted  for 
him  had  a  policy  of  their  own.  The  period  from  the  seizure 
in  1664  to  the  recapture  in  1673  was  marked  by  the  promul- 
gation of  the  "Duke's  Laws" — not  illiberal  in  those  days 
from  a  source  claiming  arbitrary  power;  by  a  change  in  the 
mode  of  government  in  the  chief  city;  by  the  denial  of  any 
claim  by  Connecticut  over  Long  Island;  by  the  gift  by  the 
Duke  of  York  of  New  Jersey  to  Lord  Berkeley  and  Sir 
George  Carteret,  thus  narrowing  the  borders  of  New  York; 
and  by  refusal  to  allow  a  legislature  to  be  elected  by  the 
people.  Francis  Lovelace,  the  second  governor,  ran  into 
debt  to  the  Duke  of  York  and  returning  to  England  was 
arrested  and  his  estate  confiscated.  While  he  was  attending 
to  troubles  in  New  Jersey,  Captain  Manning  was  acting  as 
governor  at  the  time  that  the  Dutch  fleet  restored  the  flag 


8  PROGRESS  OF  THE  EMPIRE  STATE 

of  the  Netherlands,  and  when  the  English  came  into  power 
again  the  captain  was  cashiered  for  the  surrender  and  his 
sword  was  broken  over  his  head. 

Andros  set  about  his  business  with  stern  vigor.  He 
required  the  Dutch  burghers  against  their  protest  to  take  a 
strict  oath  of  allegiance.  One  Jacob  Milbourne,  whom  he 
arrested  as  a  "mutinous  person,"  gained  in  London  a  verdict 
of  £45  against  him.  He  landed  a  force  on  the  Connecticut 
River  to  assert  the  Duke's  title  there,  and  soldiers  were  sent 
to  Martha's  Vineyard  and  Nantucket  for  a  like  purpose. 
At  Pemaquid  in  Maine  he  built  a  fort  and  claimed  the 
vicinage  as  a  dependency  of  New  York.  He  sought  amity 
with  the  red  men,  and  on  a  visit  to  them  penetrated 
"nearly  a  hundred  miles  beyond  Schenectady,"  to  the 
sources  of  the  Mohawk.  In  a  conference  with  him  in  Albany 
the  Iroquois  expressed  their  good  will.  By  a  board  of 
commissioners  of  Indian  affairs,  with  Robert  Livingston  as 
secretary,  he  aimed  to  secure  permanent  peace  with  them. 

Starting  with  Andros,  the  colony  lived  under  thirty- 
three  governors,  including  lieutenants  acting  as  such,  before 
the  Revolution.  They  were  of  various  characters.  Thomas 
Dongan  (1683-1688)  was  prudent,  well-meaning  and  effi- 
cient and  less  greedy  than  some  of  his  successors.  Lord 
Cornbury  (1702-1708)  was  a  spendthrift,  wasteful  and 
reckless,  was  imprisoned  and  removed,  yet  was  to  become 
Duke  of  Clarendon.  Robert  Hunter  (1710-1719)  strove 
for  the  common  welfare,  promoted  immigration  from  the 
Palatinate  and  left  a  good  record.  William  Burnet  (1720 
1728)  added  fuel  to  the  strife  over  the  appointment,  powers, 
and  salaries  of  judges.  George  Clarke  (1736-1743)  stands 
forth  chiefly  as  conveying  to  England  in  emoluments  the 
great  fortune  of  £100,000. 

Under  unwilling  concession  from  the  Duke  of  York,  an 
assembly  met  October  17,  1683.     In  the  "charter  of  liber- 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE       9 

ties,"  that  body  declared  that  under  the  king  and  lord 
proprietor  "the  supreme  legislative  authority  shall  forever 
be  and  reside  in  a  governor,  council,  and  the  people  met  in  a 
general  assembly. "  James,  when  he  became  king,  noted 
that  this  was  the  first  mention  of  "the  people"  "in  any 
constitution  in  America."  The  suffrage  was  given  to  all 
freeholders,  and  entire  freedom  of  religion  was  enacted. 
Twelve  counties  were  provided — New  York,  Westchester, 
Ulster,  Dutchess,  Orange,  Albany,  Richmond,  Kings, 
Queens,  Suffolk,  within  the  present  State,  while  Dukes 
County  covered  Nantucket  with  Martha's  Vineyard  and 
dependencies,  and  Pemaquid  and  adjacent  territory  formed 
Cornwall. 

Chief  incidents  of  this  period  were  disputes  with  Gover- 
nor La  Barre  of  Canada  over  the  boundary  and  with  the  red 
inhabitants,  and  a  conference,  July  30,  1684,  with  Lord 
Howard  of  Virginia  and  the  Iroquois  chiefs  relative  to  the 
raids  of  their  tribes  to  the  south.  A  treaty  of  peace  was 
signed  at  Albany.  Governor  Dongan  relied  on  the  Indians 
as  the  "bulwark"  against  assaults  by  the  French,  while  he 
provided  forts  at  Ticonderoga,  Oswego,  and  Niagara. 

Sir  Edmund  Andros,  returning  as  Governor-in-Chief 
and  Captain-General  of  all  the  English  colonies  in  America, 
came  August  n,  1688,  from  Boston,  where  he  was  the  local 
governor,  to  New  York,  to  assume  the  broader  authority. 
After  a  brief  visit  here,  he  chose  to  reside  in  the  former  city. 
In  his  general  council  of  forty-two,  eight  members  represen- 
ted New  York,  but  this  colony  was  restive  over  the  favors 
granted  to  its  eastern  neighbors,  nor  did  the  course  of 
Andros  in  taking  from  New  York  all  of  its  counties  of  Corn- 
wall and  Dukes  tend  to  allay  the  bitter  feeling.  Captain 
Francis  Nicholson,  acting  as  Lieutenant-Governor,  rep- 
resented King  James  here  when  he  fled  and  gave  way  to 
William  and  Mary  as  sovereigns  of  Great  Britain. 


10  PROGRESS  OF  THE  EMPIRE  STATE 

The  change  in  the  succession  to  the  throne  threw  the 
colonies  into  excitement.  Governor  Andros  was  arrested 
in  Boston  and  a  committee  of  safety  took  his  place.  With 
his  chief  under  arrest,  it  was  claimed  that  the  authority  of 
the  lieutenant  in  New  York  ceased.  Nicholson  could  get 
no  advice  from  Andros,  and  his  own  wisdom  went  only  so 
far  as  to  declare  that  "it  was  most  safe  to  forbear  acting 
till  the  minds  of  the  people  became  better  satisfied."  But 
men  whose  minds  are  stirred  up  will  not  "forbear"  at  the 
behest  of  a  royal  agent. 

Because  King  William  was  a  Dutchman  and  had  been  a 
friend  of  New  Netherland,  a  party  arose  relying  on  his 
support,  as  Nicholson  did  not  recognize  the  great  revolution 
in  England.  Jacob  Leisler,  a  captain  of  militia,  refused  to 
pay  duties  to  the  collector,  and  Fort  James  was  held  by  the 
recusants.  Nicholson  demanded  its  surrender,  and  on 
refusal,  angrily  said  to  the  officer  in  charge,  "I  would  rather 
see  the  town  on  fire  than  commanded  by  you."  These 
words  were  interpreted  as  a  threat  to  burn  the  city  and 
massacre  the  inhabitants.  It  led  to  the  calling  out  of  the 
militia,  to  whom  he  gave  up  the  keys  of  the  fort.  Leisler 
and  five  other  captains  with  four  hundred  men  issued  a 
proclamation  that  they  awaited  orders  from  the  "power  that 
now  governeth  in  England,"  while  Nicholson  abandoned  his 
post  and  sailed  for  home. 

Into  this  vacuum  in  administration  Leisler  stepped 
boldly.  He  summoned  a  popular  convention  to  which 
only  a  part  of  the  towns  elected  delegates  (1689),  and  the 
body  constituted  itself  a  committee  of  safety.  This  com- 
mittee designated  him  captain  of  the  fort  and  soon  after 
raised  his  rank  to  that  of  commander-in-chief  with  full 
discretion,  which  he  wielded  despotically.  He  called  a 
second  assembly  and  all  the  counties  except  Queens  and 
Suffolk  chose  delegates,  who  met  April  24,  1690,  to  provide  a 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     II 

revenue,  and  again  in  September,  when  it  clothed  Leisler 
with  power  almost  unlimited.  Upon  his  invitation  the 
first  Congress  of  the  American  Colonies  was  held  in  New 
York,  May  i,  1690,  for  the  purpose  of  organizing  a  joint 
expedition  against  Canada.     The  results  were  meager. 

Before  the  arrival  of  Henry  Sloughter  to  be  governor, 
Major  Richard  Ingoldsby  landed  (September  10,  1690)  with 
two  companies  of  soldiers.  Upon  refusal  of  his  summons  for 
surrender  of  the  fort,  a  collision  occurred  March  17,  1691, 
when  Leisler's  militia  lost  six  killed,  while  of  the  soldiers 
two  were  killed  and  several  wounded.  Only  two  days  later 
Sloughter  came,  to  whom  Leisler  gave  up  the  fort,  and  with 
his  chief  supporters  was  put  in  prison.  Charged  with  trea- 
son and  murder,  they  were  the  next  month  put  on  trial 
before  a  court  framed  out  of  their  known  enemies  by  the  new 
governor  and  his  council.  Eight  were  convicted,  but  in 
time  all  were  discharged,  except  Leisler  and  Milbourne. 
In  their  behalf,  petitions  for  pardon  or  mitigation  of  sentence 
were  of  no  avail.  They  were  hanged  May  16,  1691,  and 
have  the  distinction  of  being  the  only  persons  in  this  State  or 
in  the  Union  to  suffer  death  on  the  charge  of  treason.  In 
1695  the  British  Parliament  reversed  the  attainder  of  Leisler 
and  his  associates  and  annulled  their  convictions;  Leisler's 
appointment  by  the  Assembly  was  expressly  recognized, 
while  Ingoldsby's  demand  for  the  fort  was  pronounced 
"without  legal  authority."  Leisler  had  the  faults  of  arbi- 
trary power ;  he  had  the  virtues  of  courage,  zeal,  public  spirit, 
and  his  death  is  a  stain  on  the  escutcheon  of  the  colony. 

The  burdens  of  expeditions  against  Canada  led  to  re- 
peated issues  of  paper  money.  In  1738  a  provision  was 
embodied  in  an  act  authorizing  £48,350  that  £40,000  of  the 
sum  should  be  apportioned  to  the  counties  to  be  loaned  on 
mortgage  in  amounts  not  less  than  £25  nor  more  than  £100, 
at  5  per  cent.     For  the  French  war  from  1755  to  1759  further 


12  PROGRESS  OF  THE  EMPIRE  STATE 

issues  were  voted  to  the  amount  of  £193,000.  The  Assembly 
all  the  while  was  watching  the  revenue  and  outlay  and  finally 
insisted  on  specific  grants  for  one  year  only.  It  denied  time 
after  time  the  right  of  the  British  Parliament  to  levy  taxes 
on  the  colony,  and  rested  its  own  powers  on  the  "free  choice 
of  the  people."  The  Attorney-General  reported  to  the 
Lords  of  Trade  (1729),  "Most  of  the  previous  and  open 
steps  which  a  dependent  province  can  take  to  render  them- 
selves independent  at  their  pleasure  are  taken  by  the 
assembly  of  New  York. " 

The  administration  of  William  Cosby  (1732-1736)  is 
memorable  for  the  legal  assertion  of  the  liberty  of  the  press. 
Burnet  started  the  New  York  Gazette  (1725)  as  an  official 
organ,  from  the  press  of  William  Bradford,  the  first  printer  in 
the  colony.  The  other  party  set  up  the  New  York  Journal 
as  a  rival  (1733),  under  the  control  of  John  Peter  Zenger, 
who  waged  war  in  such  fashion  that  he  was  the  next  year 
arrested  for  libel  and  put  on  trial  by  the  Attorney-General 
on  information.  The  jury  found  a  verdict  of  not  guilty,  on 
the  plea  that  the  publication  was  true.  The  doctrine  was 
far  in  advance  of  any  other  legal  utterance  of  that  period  in 
behalf  of  freedom  of  debate  in  print. 

The  annals  of  1741  are  blotted  by  the  popular  passion 
over  an  alleged  negro  plot  to  burn  New  York  City.  A  fire 
in  the  chapel  and  barracks  at  Fort  George  on  the  Battery, 
was  attributed  to  the  blacks,  and  it  was  charged  that 
Spaniards  had  emissaries  in  the  work  of  destruction.  The 
forms  of  justice  were  observed,  but  madness  sat  on  the 
bench.  A  preacher  named  Ury  was  hanged  protesting  his 
innocence;  Hughson,  a  tavern-keeper  of  the  lower  sort, 
with  his  wife  and  servant  went  to  the  gallows.  Thirteen 
blacks  were  burned  at  the  stake,  eighteen  were  hanged, 
and  seventy  transported,  for  a  conspiracy  which  had  no 
existence,  even  if  some  were  guilty  of  sporadic  crimes. 


THEODORE  ROOSEVELT 

Ex-Presiden1   of  Lhc  United  States;  bom  in  New  York  City, 
October  27  on   of  Theodore  Roosevelt   (merchant  and 

philanthropist)  and  Martha  (Bullock)  Roosevelt;  graduated 
Harvard,  A.B.,  1880;  received  degree  of  LL.D.  from  Columbia, 
1889;  Yale,  1901;  University  of  Pennsylvania,  1905;  Harvard, 
1909.  Elected  1881  and  reelected  1882  and  1883  member  New 
York  State  Assembly;  Republican  nominee  for  mayor  1886,  but 
defeated  by  Abram  S.  Hewitt;  appointed  member  United  States 
Civil  Service  Commission,  1889,  but  resigned  that  office  in  1895  to 
accept  presidency  of  Police  Commission  under  administration  of 
Mayor  Strong.  Assistant  Secretary  of  the  Navy,  1897.  Re- 
signed, when  war  with  Spain  was  declared,  and  with  Dr.  Leonard 
Wood,  organized  in  1898  the  First  Regiment  United  States 
Volunteer  Cavalry,  recruited  from  the  West  and  popularly  known 
as  the  "Rough  Riders."  Elected  in  1900  Vice-President  of  the 
United  States;  succeeded  to  Presidency  on  death  of  President 
McKinley,  September,  1901;  elected  President  in  1904.  Author, 
History  of  the  Naval  War  of  1812,  1882;  The  Winning  of  the  West, 
1889,  1896;  The  Strenuous  Life,  1900,  and  many  other  works. 
Made  trip  to  Africa,  1909-1910;  candidate  of  Progressive  party 
for  President  of  the  United  States,  19 12. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE      13 

The  air  in  the  ten  years  in  which  George  Clinton  was 
governor  (1743— 1753)  was  surcharged  with  storm.  The 
British  government,  resenting  French  aggression  in  America 
and  with  other  grievances,  was  purposing  to  renew  hostilities, 
and  the  horrors  of  border  raids  fell  on  New  York.  The 
governor  wanted  to  control  expenditures  for  peace  and  war; 
the  Assembly  held  firm  grip  over  the  finances  and  the  militia. 
For  a  movement  against  Canada,  out  of  a  population  of 
61,586,  a  force  of  1600  men  was  kept  in  the  field  by  bounties 
and  impressment.  Six  block  houses  were  built  between 
Saratoga  and  Fort  Stanwix,  and  New  York  Harbor  was  put 
in  better  state  for  defense.  But  Saratoga  was  burned:  set- 
tlers were  killed  at  Schenectady  and  Herkimer.  Colonel  Wil- 
liam Johnson  began  his  career,  and  a  letter  is  extant  in  which 
he  asks  for  money  to  pay  for  twenty-nine  scalps  and  prisoners 
brought  in  by  his  scouts,  for  he  tolerated  Indian  methods. 

The  British  government  was  lax  in  its  promised  aid  for 
the  war;  Clinton  lost  the  friendship  of  the  Iroquois;  his 
quarrels  with  leaders  added  flame  to  his  differences  with  the 
Assembly,  which  he  said  "had  no  authority  to  sit  but  by  the 
King's  commission  and  instructions  "to  him.  The  popular  life 
grew  in  vigor;  schools  and  churches  multiplied ;  the  common- 
wealth in  spirit  as  in  resourceswasreachingoutforself-control. 

The  French  war  forced  local  strife  into  the  background. 
James  De  Lancey  held  sway  as  lieutenant-governor  (1755— 
1760),  with  two  nominal  governors  for  brief  periods.  To 
enlist  the  Iroquois  and  to  combine  the  colonies,  a  congress 
was  held  in  Albany,  June  14,  1754.  New  England,  Penn- 
sylvania, and  Maryland,  as  well  as  New  York,  were  repre- 
sented, and  a  form  of  union  of  the  colonies  was  adopted, 
but  it  was  never  put  into  operation.  A  conference  of 
governors  in  Virginia  the  next  year  proposed  four  expedi- 
tions against  the  French,  and  De  Lancey  was  present  for 
New  York.     One  was  to  seize  Fort  Niagara;  another  was 


14  PROGRESS  OF  THE  EMPIRE  STATE 

to  retake  Crown  Point.  The  defeat  of  General  Braddock 
made  interior  New  York  the  main  theater  of  conflict,  and 
the  advance  against  Niagara  stopped  at  Oswego.  On  the 
eastern  border,  the  French  confronted  the  colonial  forces 
under  Colonel  Johnson  at  Fort  Edward  where  a  battle  was 
fought,  and  the  invaders  were  defeated,  with  a  loss  of  400 
killed  and  wounded  among  the  French,  312  to  the  colonists, 
and  40  to  the  Iroquois. 

A  grave  evil  befell  the  colony  when  Parliament  decided 
to  keep  a  permanent  army  in  America  and  to  quarter  its 
regulars  on  the  inhabitants,  for  they  were  only  a  grievance 
and  not  a  defense.  The  Earl  of  Loudon  as  commander-in- 
chief  arrived  in  July,  1756,  and  had  10,000  men  subject  to 
his  orders.  Montcalm  with  his  red  allies  was  more  active 
and  efficient  than  were  the  British,  and  ravaged  on  Lake 
George  and  the  Mohawk  to  Rome  as  well  as  along  Lake 
Ontario.  By  the  final  defeat  and  death  of  Montcalm  at 
Quebec,  Canada  became  British,  New  York  was  saved  from 
further  invasion  from  that  quarter,  and  amity  with  the  In- 
dians on  its  soil  was  restored.  The  colony  had  poured  out 
men  and  money  freely  for  defense.  With  a  population  in 
1756  of  only  83,233  whites  and  13,542  blacks,  it  had  kept 
a  force  of  2680  in  the  field  and  incurred  a  war  debt  above 
£300,000  with  a  tax  levy  of  #40,000  a  year. 

Governor  and  judges  sought  to  have  the  judicial  tenure 
run  "at  his  Majesty's  pleasure,"  while  the  Assembly  would 
pay  salaries  only  if  the  commissions  were  during  good 
behavior.  Lines  of  political  division  were  drawn  between 
Episcopalians  on  one  hand  and  Presbyterians  and  other  dis- 
senters on  the  other.  Over  the  judiciary  and  taxation,  over 
the  restriction  of  trade,  manufactures,  and  immigration,  peti- 
tions and  addresses  to  the  King,  to  the  Lords  of  Trade,  to 
the  Governor,  to  Parliament,  reciting  abuses  and  calling  for 
remedy,  grew  in  number,  in  vigor,  in  eloquence,  in  1763  and 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     15 

1764.  They  demanded  "exemption  from  the  burthens  of 
ungranted  involuntary  taxes  as  the  grand  principle  of  every 
State,"  and  prophesied  "the  tragical  consequences  to  the 
crown,  the  mother  country,  the  colony  and  to  posterity" 
of  the  denial  of  rights  and  of  the  wrongs  endured.  New 
York  by  its  assembly  October  18,  1764,  clothed  a  committee 
with  power  to  "correspond  with  the  several  assemblies  or 
committees  of  assemblies  on  this  continent,  on  the  Sugar  Act, 
the  act  restraining  bills  of  credit  from  being  a  legal  tender; 
and  the  several  other  acts  of  Parliament  with  relation  to  the 
trade  of  the  northern  colonies;  and  also  on  the  impending 
dangers  which  threaten  the  colonies  of  being  taxed  by  laws  to 
be  passed  in  Great  Britain."  Thus  began  official  action  look- 
ing to  American  union  for  the  assertion  of  American  liberty. 

Cadwallader  Colden,  as  lieutenant-governor,  wielded  the 
executive  authority  from  1760  to  1765,  although  Robert 
Monckton  for  a  while  held  the  title  of  governor.  Colden 
came  into  conflict  with  the  Assembly  by  an  attempt  to 
enforce  an  appeal  from  the  verdict  of  a  jury  by  extending 
admiralty  jurisdiction.  The  assembly  vigorously  reiterated 
the  popular  demands.  In  a  colonial  congress,  without  dele- 
gates from  Virginia  and  Georgia,  which  met  in  New  York, 
this  colony  took  part  by  its  committee.  A  petition  to  the 
King  by  Philip  Livingston,  and  a  "declaration  of  rights  and 
grievances"  by  John  Cruger,  both  of  New  York,  were  adop- 
ted. October  31,  1765,  the  day  before  the  Stamp  Act  went 
into  effect,  the  merchants  appointed  a  committee  to  agree  on 
a  general  policy  of  resistance. 

Mobs  burned  Colden's  carriage  and  hanged  him  in  effigy 
and  scuttled  the  house  of  the  commandant  at  Fort  James. 
When  the  stamps  arrived,  the  acting  governor  was  com- 
pelled to  hand  them  over  to  the  patriot  mayor  and  cor- 
poration. Less  violence,  but  a  like  temper,  was  shown  in 
Albany.     The  Sons  of  Liberty,  a  club  dating  from  Zenger's 


16  PROGRESS  OF  THE  EMPIRE  STATE 

trial,  declared  they  "would  venture  their  lives  and  fortunes 
effectually  to  prevent  the  Stamp  Act. "  Joy  at  the  repeal  of 
the  act  was  turned  into  grief  by  a  demand  by  the  London 
authorities  that  the  assembly  should  provide  quarters,  fire- 
wood, drink,  soap,  and  candles,  for  as  many  soldiers  as  might 
be  sent.  The  assembly  temporized,  but  opposition  was 
strong  among  the  citizens  and  collisions  occurred  between 
them  and  soldiers.  Sir  Henry  Moore,  who  had  become  gov- 
ernor, tried  in  November,  1765,  to  force  the  asssembly  to 
vote  the  required  provision,  but  two  prorogations  led  only 
to  refusal.  Parliament  (1767)  forbade  the  assembly  to 
pass  any  acts  until  it  had  complied  with  the  demand  for  care 
for  the  troops,  and  this  suspension  lasted  for  two  years. 

Meanwhile,  in  1768,  a  conference  was  held  at  Fort  Stan- 
wix  in  which  Sir  William  Johnson  for  New  York,  with  dele- 
gates from  New  Jersey,  Virginia,  and  Pennyslvania,  met 
thirty-two  hundred  red  men  of  the  Six  Nations,  the  Dela- 
wares,  and  the  Shawnees.  By  formal  treaty  a  boundary 
line  was  fixed,  land  and  concessions  were  granted  to  the 
crown,  and  £2000  was  paid  to  the  Indians. 

A  new  assembly  in  1769  appropriated  £2000  for  the  Brit- 
ish troops  by  a  majority  of  one  vote,  and  was  denounced  for 
it  by  a  meeting  in  New  York  City  of  fourteen  hundred  citi- 
zens. By  strict  adherence  to  a  policy  of  non-importation 
New  York  lost  five  sixths  of  its  trade,  which  thrifty  neigh- 
bors gathered  in.  In  1770,  tea  only  was  excluded  from 
import  here. 

British  soldiers  tried  to  saw  down  a  liberty  pole  set  up 
on  the  repeal  of  the  Stamp  Act,  and  on  a  third  attempt  cut 
it  into  billets.  They  were  denounced  at  a  meeting  in  the 
city  park,  and  three  of  them  were  seized  while  posting  a 
scurrilous  handbill.  A  rescue  squad  of  soldiers  was  resisted 
by  a  party  of  citizens,  but  was  reinforced.  On  Golden  Hill, 
January  18,  1770,  blows  were  dealt,  several  were  wounded  on 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE      17 

both  sides,  and  the  next  day  a  sailor  was  pierced  through  the 
body  unto  death.  The  soldiers  were  finally  driven  to  their 
barracks,  while  a  new  pole  was  erected  to  celebrate  the  popu- 
lar victory,  won  by  irregular  fighting  against  British  troops 
and  colored  by  the  first  blood  in  a  contest  to  broaden  into 
the  Revolution. 

A  public  meeting  in  "The  Fields"  resolved  that  no  tea 
should  be  imported,  duty  or  no  duty  (December  16,  1773), 
and  when  some  arrived  in  April,  1774,  it  was  cast  into  the 
river.  The  assembly  January  20,  1774,  provided  for  a  com- 
mittee for  correspondence  with  the  other  colonies.  When 
a  general  congress  suggested  by  New  York  gathered  in  Phila- 
delphia September  5, 1774,  John  Jay  and  Philip  Livingston  of 
this  colony  were  placed  on  the  committee  to  report  the  Decla- 
ration of  Rights.  The  New  York  assembly  refused  to  approve, 
even  to  consider,  the  action  of  that  congress,  but  the  Tory 
majority  so  brought  the  assembly  to  an  end.  It  gave  way 
(April  20,  1775)  to  a  provincial  convention.  The  initial 
steps  toward  the  Revolution  were  bold  and  rapid,  although 
wealth  was  timid  and  the  Episcopal  Church  was  loyal,  and 
later  the  British  army  with  its  headquarters  in  New  York 
won  no  little  social  support. 

In  the  long  and  trying  war  for  independence,  the  first 
forts  taken,  the  first  British  garrisons  captured,  were  on  the 
soil  of  New  York.  The  evacuation  of  its  chief  city  signaled 
the  actual  dawn  of  peace.  Ticonderoga,  Crown  Point,  Long 
Island,  Fort  Washington,  Oriskany,  Saratoga,  Stony  Point, 
belong  to  national  history,  as  do  the  flank  attacks  on  the 
interior  settlements  by  Indians  and  Tories  and  their  dire 
punishment  by  General  Sullivan's  campaign.  So,  too,  the 
proceedings  of  the  Continental  Congress  are  the  affairs  of 
all  the  colonies.  In  the  session  of  May,  1775,  New  York, 
through  George  Clinton,  Robert  R.  Livingston,  John  Jay, 
and  James  Duane,  asked  counsel  relative  to  the  proper 


18  PROGRESS  OF  THE  EMPIRE  STATE 

action  toward  British  troops  seeking  to  enter  the  harbor, 
and  received  advice  not  to  oppose  them  by  force.  In  the 
Continental  army  Philip  Schuyler  was  appointed  a  major- 
general,  Richard  Montgomery  a  brigadier-general,  and 
Alexander  McDougall  as  first  colonel  in  New  York's  quota. 

When  in  the  autumn  of  1776  disaster  compelled  Wash- 
ington to  abandon  New  York,  the  British  made  the  city  the 
base  of  their  military  operations  and  held  it  until  Novem- 
ber 25,  1783.  They  created  traffic;  but  they  brought  the 
ills  of  a  garrison  town  and  they  had  here  their  land  prisons 
and  their  ships  for  detention  of  captured  patriots,  redolent 
with  scandals  and  horrors. 

The  Convention  of  the  Representatives  of  the  State  of 
New  York  was  the  style  adopted  by  a  body  which  met  in  its 
chief  city  July  9,  1776.  It  pledged  support  of  the  Declara- 
tion of  Independence,  and  a  form  of  government,  reported 
by  John  Jay  as  chairman,  to  go  into  effect  when  the  military 
operations  permitted,  was  adopted  April  20,  1777.  The  Con- 
stitution was  for  its  day  liberal  and  judicious.  John  Jay 
was  appointed  as  chief  justice,  Robert  R.  Livingston  as  chan- 
cellor, and  John  Morin  Scott  was  named  as  chairman  of  a 
committee  of  safety  to  serve  until  the  legal  machinery  could 
be  set  in  motion.  At  the  first  election  George  Clinton  was 
chosen  governor,  with  Pierre  Van  Cortlandt  lieutenant- 
governor.  Clinton  was  to  be  seven  times  elected  to  the 
same  high  office  and  was  to  become  Vice-President  of 
the  United  States.  New  York  approved  the  Articles  of 
Confederation  February  6,  1778.  The  hanging  of  Nathan 
Hale  as  an  American  spy  and  of  Major  Andre  as  an  aid  to 
Benedict  Arnold's  treason  gave  a  tinge  of  personal  tragedy  to 
the  period,  while  Newburg  was  the  scene  of  an  attempt  by 
some  officers  to  intimidate  Congress,  which  was  checked  by 
the  sagacity  of  Washington.  In  framing  the  treaty  of  peace 
Jay  was  an  active  factor,  as  Alexander  Hamilton,  another 


JOHN  JACOB  AS  TOR. 


JOHN  JACOB  ASTOR 

Merchant  and  capitalist;  w  i  ,  near  Heidel- 

berg, Germany,  Jnly  17,  1763.  When  sixteen  yea 
went  to  London  and  worked  for  four  years  in  the  piani  1 
his  uncle,  .  of  the  firm  of  Astor  &  Braid 

Going  to  America, 

trade,  which  he  learned  thoroughly  in  the  service  of  a  Quaker 
furrier.     He  th<  out  for  himself ,  made  favorable  arrange- 

ments with  fur  hou  idon,  and  soon  became  chief  com- 

petitor of  the  Hudson  Ray  Company  in  the  London  market. 
The  settlement  of  Astoria  was  founded  in  181 1  at  the  mouth  of  the 
Columbia  River.  Mr.  Astor  organized  the  American  Fur  Co., 
which  built  up  an  international  tri  ading  to  China  and 

other  Asiatic  count:  invested  in  government  securities 

during  the  Civil  War,  when  I  :ig  at  from  60  to  70 

cents  on   the  dollar,  and   made  s  investments  in   real 

estate  in  New  York  I  ting  from  time  to  time  handsome 

structures  on  the  land  acquired.  He  fell  in  with  the  proposition 
of  Washington  Irving  for  a  public  library  for  New  York,  and  left 
$400,000  for  the  foundation  of  the  Astor  Library.  He  made 
many  bequests  to  charitable  institutions  during  his  life  and  by  his 
will.     He  died  March  29,   1848. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     19 

New  Yorker,  was  one  of  the  architects  and  advocates  of  the 
national  Constitution. 

The  State  hesitated  and  was  slow  in  ratifying  that  docu- 
ment. Parties  divided  on  the  question.  The  opposition 
argued  that  too  much  power  was  given  to  the  new  govern- 
ment. Ratification  was  voted  finally  by  a  majority  of  thirty 
against  twenty-seven  in  the  convention.  Five  amendments 
recommended  by  New  York  were  added  to  the  Constitution 
and  are  vital  parts. 

The  State  had  been  stunted  in  its  growth  by  the  long  and 
varied  hostilities  on  lakes  and  rivers  in  the  interior,  and  be- 
tween patriots  and  tories,  and  peace  brought  its  natural 
opportunities.  Folly  ruled  to  the  last  in  the  treatment  by 
the  commonwealth  of  its  immense  domains.  The  Dutch 
gave  lands  away  by  the  thousands  of  acres  to  governors, 
patroons,  and  favorites.  During  the  life  of  the  British 
Colony  official  greed  was  rampant,  and  estates  were  seized 
greater  than  principalities.  It  was  left  for  a  commission 
with  Governor  Clinton  at  its  head  to  sell  5,542,173  acres 
for  $1,030,433,  of  which  3,635,200  acres  went  to  Alexander 
McComb,  who  paid  for  much  of  it  only  eight  pence  an  acre. 
In  1786,  by  an  adjustment  with  Massachusetts,  this  State 
acquired  6,230,000  acres  in  the  middle  and  western  counties. 
These  lands  passed  into  the  hands  of  the  Holland  Land 
Company  and  gradually  were  sold  to  settlers. 

As  settlements  pushed  into  the  new  lands,  roads  were 
constructed  from  the  Mohawk  to  the  interior  lakes,  while 
postriders  and  stages  began  their  regular  trips  from  Albany 
to  the  several  points  of  the  compass.  Agriculture,  manu- 
factures, schools,  churches,  kept  pace  with  growing  popu- 
lation, while  foreign  commerce  rapidly  expanded;  in  the 
meantime  the  fur  trade  with  its  profits  passed  away. 

The  Continental  Congress  December  23,  1784,  chose 
New  York  for  the  national  capital,  and  there  the  first  session 


20  PROGRESS  OF  THE  EMPIRE  STATE 

under  the  Constitution  was  held,  beginning  March  30th  and 
April  6,  1789,  but  the  city  ceased  in  December,  1790,  to  be 
the  seat  of  the  central  government. 

New  York  failed  to  vote  for  President  when  Washington 
was  first  elected,  because  of  disagreement  between  the  sup- 
porters of  Governor  Clinton  and  the  party  led  by  Alexander 
Hamilton,  in  due  time  to  be  Secretary  of  the  Treasury.  They 
held  divergent  views  over  the  constitutional  procedure  in 
the  two  houses  of  the  Legislature.  At  the  initial  election 
for  State  officers,  while  Clinton  was  retained  as  governor, 
the  Federalists  secured  a  majority  in  both  the  Senate  and 
assembly.  Contest  over  the  returns  in  1792  closed  with  a 
certificate  for  Clinton  over  John  Jay  for  governor,  but  the 
Legislature  was  in  accord  with  Clinton  and  gave  him  the 
votes  of  the  State  in  the  electoral  college  in  an  unsuccessful 
canvass  for  Vice-President.     Jay  was  made  governor  in  1795. 

The  cauldron  of  politics  boiled  more  fiercely  when  Aaron 
Burr  arrayed  himself  against  Clinton  and  joined  Hamilton 
as  a  Federalist.  He  was  sent  to  the  Senate  of  the  United 
States  in  1791,  and  became  a  candidate  for  Vice-President 
in  1796.  He  took  active  part  against  the  Jay  treaty,  and 
when  he  wanted  to  return  to  the  Assembly  in  1799  was  de- 
feated chiefly  on  account  of  a  charter  which  he  secured  for 
the  Manhattan  Company,  ostensibly  to  furnish  water  but 
really  a  bank.  In  1800  Burr  organized  a  movement  for 
Jefferson  for  President,  with  himself  for  second  place.  Elec- 
tors were  chosen  on  that  basis.  The  complication  which  fol- 
lowed when  Jefferson  and  Burr  received  each  seventy-three 
votes  in  the  electoral  college  led  to  serious  results.  Hamil- 
ton turned  the  scales,  making  Jefferson  President  and  Burr 
Vice-President.  The  quarrel  grew  until  Hamilton  was  killed 
in  a  duel,  and  Burr  entered  on  a  career  which  rendered  him 
a  fugitive,  to  die  at  last  in  1836  in  obscurity  and  loneliness. 

The  rivalries  of  Hamilton  and  Burr  are  typical  of  in- 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     21 

fluences  less  tragical  which  have  kept  down  the  share  of 
New  York  in  national  affairs.  The  State  has  been  so  large 
that  the  factions  in  each  party  have  been  as  powerful  as  the 
regular  parties  elsewhere,  and  they  have  often  shut  the  door 
on  the  ambitions  of  each  other.  Sometimes  the  factions 
have  divided  on  matters  of  principle;  more  often  they  have 
been  arrayed  on  personal  grounds.  Probably  also  the  great 
prizes  in  the  professions  and  in  business,  as  the  common- 
wealth developed,  turned  many  master  minds  away  from 
public  affairs. 

This  personal  jealousy  De  Witt  Clinton  had  to  meet. 
Senator  of  the  United  States  in  1802,  Mayor  of  New  York 
City  in  1803,  he  aspired  to  the  Presidency  in  1808,  but  the 
opposition  at  home  was  virulent  and  fatal.  His  uncle,  the 
Vice-President,  was  also  ambitious  for  the  first  place,  but  in 
the  electoral  college  received  only  six  votes.  In  1812,  elec- 
tors in  favor  of  De  Witt  Clinton  were  secured  from  New 
York,whiIethe  Federalists  in  other  Statesmade  himtheparty 
candidate.  But  Daniel  D.  Tompkins,  who  had  been  chosen 
governor  in  1807  by  an  alliance  with  Clinton,  had  schemes 
of  his  own,  and  other  former  local  friends  gave  no  aid,  so  that 
in  the  electoral  college  Clinton  secured  only  89  votes  against 
128  cast  for  the  renomination  of  Madison.  The  services 
of  Clinton  were  to  be  devoted  to  his  own  common- 
wealth. 

The  Embargo  Act  of  1807  struck  a  heavy  blow  at  the  com- 
merce of  New  York,  and  the  State  became  earnest  for  repeal 
and  in  favor  of  the  non-intercourse  policy  of  1809.  The 
British  orders  in  council,  the  decrees  of  Napoleon  from  Ber- 
lin and  Milan,  and  the  impressment  of  seamen  by  Britain 
touched  the  vital  interests  of  the  State  and  threatened  their 
ruin.  But  knowledge  of  its  own  perils,  with  harbor  and 
borders  open  to  attack,  led  to  deliberation  when  war  clouds 
gathered.     However,  the  moment  the  second  conflict  with 


22  PROGRESS  OF  THE  EMPIRE  STATE 

Great  Britain  actually  began  New  York  put  forth  every 
effort  for  the  nation  and  for  its  own  defense.  Tompkins 
continued  as  governor  by  successive  reflections,  as  his  energy 
and  self-sacrifice  deserved.  On  Lake  Ontario  and  the  St. 
Lawrence,  on  Lake  Champlain  and  its  affluents  in  the  sum- 
mer and  autumn  of  1812,  attack  and  counter-attack  followed 
each  other  on  land  and  water,  but  General  Dearborn  who 
commanded  the  American  forces  fell  under  criticism  for  lack 
of  zeal.  The  campaign  of  1813  on  the  northern  frontier  was 
full  of  incident,  but  General  Wilkinson  who  was  in  chief  com- 
mand became  ill.  All  dreams  of  advance  against  Montreal 
proved  futile,  and  new  sufferings  were  added  to  the  record 
of  New  York.  In  the  next  year  (1814),  General  Winfield 
Scott  won  the  battle  of  Chippewa  July  5th  and  was  success- 
ful at  Lundy's  Lane  July  25th,  as  was  General  Jacob  Brown 
August  15th  before  Fort  Erie,  but  the  last  gain  was  lost 
under  other  leadership  in  October.  On  the  Saranac  and 
in  Plattsburg  Bay  Commodore  MacDonough  with  General 
Macomb  repelled  an  invasion  of  12,000  British  by  their  dash 
and  skill. 

Rumors  of  attack  on  New  York  City  were  rife  in  August, 
1814,  from  the  sea  and  even  down  the  Hudson.  Privateers 
were  sent  out;  on  the  fortifications  everybody  was  set  to 
work,  while  a  levy  of  the  entire  militia  of  Oneida,  Lewis,  and 
Herkimer  called  out  the  mass  of  the  citizens.  But  the 
Americans  warded  off  attacks  at  the  north,  and  Commodore 
Decatur  in  the  Sound  and  near-by  waters  inspired  confidence. 
The  popular  response  was  prompt  and  generous,  although 
frontier  settlements  were  almost  ruined  and  their  inhabitants 
impoverished,  and  in  the  chief  city  business  was  for  the  time 
in  large  part  destroyed.  New  York  performed  its  full  duty 
in  the  crisis.  The  treaty  of  Ghent,  ratified  early  in  1815, 
gave  the  desired  change  from  the  tasks  of  war  to  the  privi- 
leges of  peace, — to  broader  manufactures,  to  revived  com- 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     23 

merce,  to  the  extension  of  the  policy  of  improving  the  natural 
waterways  and  of  adding  to  them. 

As  early  as  1768  Governor  Moore  suggested  a  canal  to 
avoid  the  rapids  in  the  Mohawk  at  Little  Falls,  for  that 
river  was  used  by  boats  of  divers  sorts.  Men's  minds  for 
two  score  years  were  pondering  better  facilities.  Gouver- 
neur  Morris  and  De  Witt  Clinton  with  others  asked  for 
national  aid  for  a  canal  to  join  Lake  Erie  with  the  Hudson, 
but  could  get  no  favorable  response.  They  estimated  (181 1) 
that  the  cost  would  be  #5,000,000  and  the  freight  carried 
within  a  century  would  amount  to  #100,000,000  a  year.  In 
fact  that  value  was  #305,301,920  in  1867  but  was  only 
#66,331,817  in  1904.  Nothing  could  be  done  for  this  work 
during  the  war  with  Great  Britain,  although  grants  of  lands 
were  offered  by  private  holders  to  the  extent  of  107,632  acres. 
On  estimates  that  the  Erie  Canal  could  cost  #4,571,813  and 
the  Champlain  Canal  #871,000,  an  act  was  passed  in  1817 
authorizing  their  construction,  and  providing  for  a  board 
which  might  borrow  money,  not  over  #400,000  in  amount 
annually  for  this  use.  Under  this  law  ground  was  broken 
July  4,  1817,  at  Rome,  in  the  presence  of  De  Witt  Clinton 
as  governor.  His  election  to  that  place  was  due  to  the  resig- 
nation of  Tompkins  to  assume  his  duties  as  Vice-President 
of  the  United  States.  Both  he  and  Rufus  King  aspired  to 
the  presidency  in  1816,  and  the  latter  received  the  Federalist 
vote,  34,  in  the  electoral  college,  while  the  former  accepted 
the  second  place  under  James  Monroe  and  was  again  chosen 
in  1820. 

De  Witt  Clinton  had  large  projects  for  the  improvement 
and  extension  of  the  waterways  in  and  beyond  the  State. 
He  was  urgent  in  pressing  the  construction  of  the  Erie  and 
Champlain  canals.  In  the  autumn  of  1819  navigation  was 
opened  between  Utica  and  Rome  and  on  the  Champlain, 
and  the  next  year  boats  passed  from  Utica  to  the  Seneca 


24  PROGRESS  OF  THE  EMPIRE  STATE 

River.  Navigation  from  Lake  Erie  to  the  Hudson  was 
achieved  October  26,  1825.  In  the  interval  party  strife  was 
keen  and  vociferous  over  the  alleged  use  of  Federal  patron- 
age in  the  State  and  not  less  over  personal  rivalries.  Clinton 
was  denounced  for  approaching  the  "very  verge  of  treason," 
and  the  storm  arose  to  such  height  that  he  chose  not  to  be 
a  candidate  for  reelection  in  1822  and  was  removed  by  the 
Legislature  from  his  place  on  the  Canal  Commission  in 
1824.  On  appeal  to  the  ballot-box  in  that  year  he  was  again 
chosen  governor.  As  a  Clintonian,  John  W.  Taylor  was 
elected  Speaker  of  the  House  of  Representatives  of  the  United 
States  in  1820  and  again  in  1825,  the  only  New  Yorker  who 
was  ever  chosen  to  that  position  except  that  Theodore  M. 
Pomeroy  had  that  honor  for  a  single  day  at  the  close  of  the 
session  in  March,  1859. 

The  leader  of  the  opposition  to  Governor  Clinton  was 
Martin  Van  Buren,  with  Tammany  Hall  at  his  back.  United 
States  Senator  by  election  in  1821  and  again  in  1827,  he  ac- 
cepted the  portfolio  of  Secretary  of  State  in  1829  in  General 
Jackson's  Cabinet,  was  elected  Vice-President  in  that  Presi- 
dent's second  term  in  1832,  and  President  in  1836,  and  en- 
joyed a  long  career  as  head  of  his  party  until  he  broke  with 
the  pro-slavery  leaders. 

The  cost  of  the  Erie  Canal  as  adjusted  was  $7,143,789. 
Plans  for  enlargement  were  adopted  in  1835,  but  scandals 
led  to  a  stoppage  of  the  work  in  1842.  In  1847  the  enlarge- 
ment was  resumed  and  was  completed  in  1862,  bringing  the 
outlay  on  the  canal  up  to  $52,491,915.  Governor  Clinton 
advocated  the  construction  of  lateral  canals,  and  ten  were 
opened  to  navigation  in  the  years  from  1831  to  1850  at  a 
cost  of  $27,554,422.  The  Crooked  Lake,  the  Chemung,  the 
Chenango,  and  the  Genesee  Valley  were  after  trial  abandoned 
as  unprofitable.  There  remain  canals  with  their  feeders 
638  miles  in  length:  the  Erie,  361   miles;  the  Champlain, 


0        (X)  .  ^«,  .    ^K/>-o— «- —  aJU-^x-XZZ^> 


JAMES  S.  T.  STRANAHAN 

ipitalisl ;  born  in  i    unty, 

N.  Y.,  April  25,  [808;  <  itute.     Wa 

ng  and  wareho  .  being  pre 

founder  of  the  Atlantic  Docks,  president  of  [yn  Bridge 

ad  president  of  the  (Jnio  iberof  the 

Board  of  Aldermen,  a  candidate  for  the  State  Assembly  and 
mayoralty,  and  member  of  Congress  as  a  Republican,  [855-1857. 
Was  a  charter  member  of  the  ('.  ■  Brooklyn  National 

City  Bank  for  forty  us;  director  of  the  South  Brooklyn 

Savings  Bank  for  forty-eight  years;  di  1    Life 

Insura 

the  Kings  County  Trust   Co.      Was  a  memb  York 

Cham  .   member  of  the   Produce 

■  :nge;  and  of  many  clubs  and  educational  organizations  in 
Brooklyn.     Was  a  member  of  the  first  metropolitan  police  com- 
mission in  1858;  president  of  the  Park  Com 
having  much  to  do  with  the  development  of  Broo 
system;  preside  1  uittee;  delegate 

Republican  national  conventions  of  i860  and  1S64;  el 
at  large  from  the  State  of  New  York,  1888.     Died  September  3, 
1898. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     25 

81  miles;  the  Black  River,  89  miles;  the  Oneida  Lake,  7 
miles;  the  Oswego,  77  miles;  and  the  Cayuga  and  Seneca, 
23  miles.  Their  maximum  tonnage  was  reached  in  1872 
at  6,467,888  tons.  All  tolls  were  abolished  by  popular  vote 
in  1882.  The  claim  was  made  that  the  earnings  of  the  can- 
als had  repaid  all  outlay  for  them  and  given  to  the  State  be- 
sides #42,000,000.  If  the  natural  channels  which  have  been 
improved  are  added,  the  artificial  waters  of  the  State  are 
found  to  be  907  miles.  Aid  from  public  funds  was  granted 
to  the  Delaware  and  Hudson  Canal  between  Honesdale,  Pa., 
and  Newburg,  N.  Y. 

Horatio  Seymour  in  1844,  as  chairman  of  the  Committee 
on  Canals  in  the  Assembly,  became  the  leading  champion  of 
the  enlargement  of  the  canal  and  later  of  the  abolition  of 
tolls,  and  the  success  of  the  policy  was  due  largely  to  him. 
Speaker  of  the  Assembly  in  1845,  defeated  for  governor  in 
1850,  but  elected  in  1852  and  once  more  in  1861,  he  won  the 
confidence  of  his  party  and  general  admiration  as  a  citizen. 
Nominated  for  President  in  1868  against  his  protest,  after 
his  defeat  he  adorned  private  life  by  his  graces  and  virtues 
and  by  the  eloquence  of  his  occasional  addresses. 

The  constitutions  of  the  State  have  been  four.  After 
the  original  draft  of  1801,  a  complete  revision  was  approved 
by  the  people  in  1822  and  another  was  perfected  by  the  con- 
vention of  1846.  This  stood  until  the  adoption  of  the  pres- 
ent constitution  in  1894.  A  multiplicity  of  amendments  has 
been  submitted  for  popular  approval;  many  were  rejected; 
many  became  parts  of  the  fundamental  law.  A  complete 
project  submitted  by  a  convention  duly  called  was  rejected 
at  the  polls  in  1869  and  only  one  of  its  provisions  was 
adopted.  The  tendency  has  been  on  the  whole  to  increase 
direct  control  by  the  people,  and  to  place  restrictions  on 
expenditure  and  debt. 

Not  for  the  first  time  nor  the  last  the  politicians  in  this 


26  PROGRESS  OF  THE  EMPIRE  STATE 

commonwealth  were  charged  with  bad  faith  in  the  presiden- 
tial canvass  of  1824.  The  friends  of  William  H.  Crawford, 
Democrat,  blamed  Martin  Van  Buren  with  unfairly  taking 
from  him  the  electoral  votes  of  New  York,  of  which  he  received 
only  five,  while  the  supporters  of  Henry  Clay,  Whig,  were 
aggrieved  because  only  four  electors  were  for  him.  Twenty- 
six  were  for  John  Quincy  Adams,  whose  name  was  thus 
placed  among  the  highest  three  candidates  and  he  became 
eligible  for  the  election  to  the  presidency  which  was  con- 
ferred on  him  by  the  House  of  Representatives.  Chaos 
prevailed  in  politics,  for  divisions  asserted  themselves  on 
questions  of  the  canals,  of  Freemasonry,  of  the  ambitions 
of  De  Witt  Clinton,  of  the  alleged  intrigues  in  Washington 
of  Martin  Van  Buren.  Albany  became  a  center  of  power, 
with  Edwin  Croswell  of  the  Argus  at  the  head  of  the 
Democratic  "Regency,"  and  the  Journal,  directed  by 
Thurlow  Weed,  putting  men  up  or  down  on  the  other 
side. 

To  the  people  living  remote  from  the  canals  the  burdens 
involved  in  their  construction  seemed  heavy,  while  the  im- 
petus given  to  immigration,  traffic,  and  industry  spent  its 
main  force  along  the  route  of  the  chief  waterway.  In  the 
same  public  spirit  State  aid  was  granted  to  the  New  York 
and  Erie  Railroad,  by  a  loan  of  #3 ,000,000 ;  of  smaller  sums 
to  the  Canajoharie  and  Catskill  Railroad,  which  were  never 
repaid;  and  of  $500,000  to  the  Ithaca  and  Oswego,  of  which 
only  $184,300  was  returned.  Loans  were  made  to  five  other 
railroads  to  assist  in  construction  and  in  due  time  repaid. 
Later  a  policy  prevailed  for  towns  and  cities  to  subscribe 
for  stock  in  railroad  enterprises,  some  of  which  proved  profit- 
able, while  others  were  a  partial  or  total  loss.  The  greater 
lines  were  always  private  corporations,  and  several  are 
consolidations  of  parts  originally  local  projects.  The  first 
charter  granted  for  a  railroad  was  between  Albany  and 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     27 

Schenectady  in  1826,  but  cars  were  not  run  until  1831 ;  the 
road  is  now  a  link  in  the  New  York  Central  system. 

New  York  cast  its  electoral  vote  in  1832  for  General 
Jackson  for  a  second  term  as  President,  under  the  manage- 
ment of  Martin  Van  Buren,  who  was  the  candidate  for  Vice- 
President  on  the  same  ticket.  The  bankers  of  the  chief 
city  were  adroitly  arrayed  by  hostility  to  the  competition 
there  of  a  branch  of  the  United  States  Bank,  while  the  party 
was  brought  to  a  discipline  rare  in  those  days.  Van  Buren's 
nomination  for  President  in  1836  was  followed  by  a  popular 
majority  for  him  of  nearly  ten  per  cent,  of  the  vote  cast 
in  the  State  and  by  his  election  as  the  first  New  Yorker  to 
be  made  chief  magistrate  of  the  republic.  His  defeat  in 
1840  in  a  canvass  for  reelection  was  quite  as  signal  in  his 
home  State  as  in  the  nation.  In  1848,  the  Democratic  party 
became  divided  and  Mr.  Van  Buren  was  nominated  for 
President  by  the  free-soil  element,  in  revolt  against  the 
regular  candidate,  Lewis  Cass.  This  action  gave  the  electoral 
vote  of  New  York  to  the  Whigs  with  Zachary  Taylor  for 
President. 

This  period  was  marked  by  much  activity  in  politics  in 
the  commonwealth.  Enos  D.  Throop  succeeded  Van  Buren 
as  governor  and  was  followed  (1832-1838)  by  William  L. 
Marcy,  who  had  been  chosen  United  States  Senator  in  1831, 
and  became  Secretary  of  War  under  Polk  and  Secretary  of 
State  under  Pierce;  he  believed  that  the  nomination  for 
President  in  1852  was  within  his  reach  but  it  was  snatched 
away  by  a  faction  in  his  home  State  led  by  Daniel  S.  Dickin- 
son. Marcy  was  defeated  for  reelection  as  governor  in  1838 
by  William  H.  Seward,  who  entered  the  State  Senate  in  183 1 
and  had  given  proof  of  his  ability  and  his  skill  in  statecraft. 
For  advocating  the  allotment  of  a  share  of  the  school  funds 
to  the  Catholics,  he  was  beaten  at  the  polls  for  a  third  term 
as  governor  and  William  C.  Bouck  won  the  position. 


28  PROGRESS  OF  THE  EMPIRE  STATE 

Relations  with  Canada  along  the  New  York  border  have 
often  involved  peril,  and  for  a  while  at  the  close  of  1837  and 
during  1838  the  acts  of  agitators  on  the  American  side  threat- 
ened to  involve  the  United  States  and  Great  Britain.  In  both 
the  upper  and  lower  provinces  insurrection  was  organized 
against  the  Canadian  authorities  by  William  L.  Mackenzie 
and  Joseph  J.  Papineau,  who  called  for  allies  in  northern 
and  western  New  York.     These  allies  seized  Navy  Island 
in  Canadian  waters,  and  for  communication  with  the  Ameri- 
can mainland  had  a  steamboat  called  the  Caroline.     This 
was  left  on  the  night  of  December  29,  1837,  with  its  crew 
asleep,  moored  at  a  landing  on  the  New  York  bank,  whence 
a  squad  from  Canada  under  Colonel  MacNab  cut  the  vessel 
loose,  having  set  it  on  fire,  and  let  it  drift  down  the  rapids. 
All  on  board  were  killed,  drowned  or  wounded.     Our  na- 
tional government  resented  the  invasion  of  American  soil, 
and  set  competent  army  officers  for  the  defense  of  the  fron- 
tier.    Talk  of  invasion  of  Canada  was  passionate  south  of 
the  St.  Lawrence,  and  trifling  raids  were  risked.     November 
11,  1838,  a  party  landed  at  Prescott;  and  two  days  later  a 
collision  occurred  at  Windmill  Point,  with  a  loss  to  the  in- 
vaders of  eighteen  killed  and  wounded  and  to  the  Canadians 
of  eighty-two.     After  four  days  the  authorities  arrayed  so 
strong  a  force  as  to  compel  surrender  of  the  invaders.     They 
were  held  as  prisoners  and  treated  with  scant  mercy.  Only  four 
were  Canadians;  five  were  foreigners,  while  170  were  mostly 
from  the  northern  counties  of  New  York,  not  a  few  of  them 
boys  under  seventeen.     The  leader  and  seven  others  were 
hanged,  some  were  shipped  to  Van  Diemen's  Land,  some 
imprisoned,  some  released,  and  a  few  acquitted. 

The  affair  took  a  new  phase  in  1842  when  on  the  arrest 
of  Alexander  McLeod  in  this  State  for  taking  part  in  the 
burning  of  the  Caroline  and  the  murder  of  its  crew,  the  Brit- 
ish government  assumed  the  responsibility  as  an  act  of  war, 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     29 

and  demanded  his  release.  The  government  at  Washington 
refused  to  give  him  up  and  insisted  on  his  trial.  He  was 
found  innocent  and  proved  to  have  indulged  in  drunken 
swagger  of  his  alleged  share  in  the  incident.  For  a  long 
period  popular  feeling  along  the  northern  frontier  was  kept 
in  a  ferment  over  the  treatment  of  the  men  captured  at 
Windmill  Point,  the  folly  of  the  rebel  leaders  in  Canada,  and 
the  attitude  of  the  authorities  of  the  Dominion. 

Signs  were  not  lacking  that  serious  divisions  were 
shattering  parties  and  threatening  national  peril  over  the 
extension  of  slavery  and  the  power  of  the  champions  of  that 
institution.  As  early  as  1834  in  New  York  City,  meetings 
in  favor  of  the  restriction  or  gradual  abolition  of  slavery 
were  broken  up  and  citizens  mobbed  for  advocating  that 
cause.  A  mob  drove  an  anti-slavery  convention  out  of  Utica 
in  1835.  The  position  of  extremists  marked  the  cleavage 
at  hand.  Silas  Wright,  who  was  elected  governor  in  1844, 
opposed  as  a  United  States  Senator  (1833-1844)  the  annexa- 
tion of  Texas,  and  felt  the  hostility  of  the  Polk  administra- 
tion and  its  friends  as  a  candidate  for  a  second  term  in  1846, 
when  he  was  defeated  by  John  Young.  His  influence  was 
potent  in  creating  and  promoting  free-soil  sentiment  among 
voters  still  clinging  to  the  Democratic  party;  but  the  con- 
trol of  that  organization  in  the  nation  and  in  this  State  was 
with  those  who  held  other  views. 

The  Whig  party  here  as  elsewhere  was  disintegrating 
more  rapidly  than  its  antagonist.  William  H.  Seward  was 
the  favorite  of  the  young  and  ardent  who  claimed  that 
slavery  meant  disunion.  Even  in  private  life  his  counsel 
was  of  the  first  account,  and  with  Thurlow  Weed  and  Horace 
Greeley  his  triumvirate  was  forceful  and  far-reaching.  He 
stood  in  the  front  of  the  advocates  for  the  restriction  of 
slavery  and  early  foresaw  the  "irrepressible  conflict,"  al- 
though like  others  he  did  not  appreciate  its  magnitude.     In 


30  PROGRESS  OF  THE  EMPIRE  STATE 

State  affairs  he  had  favored  public  improvements  and  a  lib- 
eral canal  policy;  his  friends  were  zealous  in  developing 
street  railroads  in  New  York  City  under  special  charters 
with  broad  privileges;  and  some  men  close  to  him  pleaded 
that  such  franchises  might  fairly  be  granted  for  partisan 
services.  Personally  one  of  the  purest  men,  basing  his  ar- 
guments in  the  United  States  Senate  (1849-1861)  on  the 
highest  moral  grounds,  he  was  presented  for  the  presidency 
in  i860  by  a  united  delegation  from  his  State  to  the  Repub- 
lican National  Convention,  but  was  set  aside  when  Horace 
Greeley,  a  former  ally,  acted  as  a  bitter  foe.  He  gave  his 
best  aid  for  the  election  of  his  successful  rival,  Abraham 
Lincoln,  and  became  a  mainstay  of  his  administration  as 
Secretary  of  State. 

The  feudal  tenure  on  which  the  patroons  and  other  great 
landlords  permitted  tenants  to  cultivate  their  soil,  and  the 
onerous  conditions  which  they  exacted  from  purchasers,  led 
to  prolonged  disagreements  and  to  legislation  with  a  view 
to  remedy  the  evils.  In  1836  the  grievances  were  asserted 
in  Chautauqua  and  Genesee  counties  against  the  Holland 
Land  Company,  by  mobs  and  violence.  In  Rensselaer  and 
Albany,  on  the  great  Van  Rensselaer  estate,  resistance  to 
legal  processes  to  enforce  the  demands  of  the  landlords  in 
1839  took  the  form  of  armed  forces  in  disguise,  who  aroused 
terror  in  the  vicinage.  Governor  Seward  called  out  several 
military  companies  and  compelled  observance  of  the  law. 
The  sore  was  not  healed.  Columbia,  Delaware,  and  Scho- 
harie became  the  theater  of  agrarian  outrages  in  which  hun- 
dreds of  men  took  part.  They  drove  Governor  Wright  to 
call  out  the  militia,  by  whose  help  many  arrests  were  made. 
Over  fifty-four  culprits  were  convicted,  but  were  in  time 
pardoned  by  Governor  Young.  In  the  constitution  of  1846, 
provisions  were  embodied  to  limit  leases  and  prevent  cruel 
conditions,  and  in  1852  the  Court  of  Appeals  so  construed  the 


/ 


C?^£C 


JAMES  A.  BURDEN 

Iron  manufacturer;  horn  in  Troy,  N.  Y.,  January  6,  1833;  edu- 
cated  Sheffield  ool  at  Yale,  and  Rensselaer  Poly- 

technic Institute,  Troy,  N.  Y.  Was  president,  and  director  of  the 
Burden  Iron  Co.  of  Troy,  and  director  of  the  United  National 
Bank,  of  Troy.  Was  Presidential  elector  on  the  Republican 
in  1880  and  1888.  Was  member  of  the  Iron  and  Steel 
Institute  of  Great  Britain,  Society  of  Civil  Engineers,  Society  of 
anical  En  ad  American  Mining  Engineers;  mem- 

lamber  of  Commerce;  president  of  the  Engi- 
\c\v  York;  president  of  the  Society  of  New  York 
Farmers;  member  of  the  Metropolitan,  Union,  Union  League,  and 
other  clubs  of  New  York.     Died  at  908  Fifth  Avenue,  September 
23,  1906. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     31 

statutes  as  to  remove  the  discontent.  Once  again,  in  1866, 
aimed  force  was  called  out  to  check  violence  on  the  part  of 
tenants.  The  controversy  soon  disappeared  from  politics 
and  from  outrage,  and  was  confined  to  private  litigation. 

After  New  York  in  1844  cast  its  electoral  votes  for  James 
K.  Polk  against  Henry  Clay  by  a  plurality  of  5106,  with 
15,812  ballots  for  James  G.  Birney  of  the  Liberty  party, 
division  among  the  Democrats  of  the  State  grew  broader  and 
more  bitter.  The  administration  of  President  Polk  was 
charged  with  ostracizing  Governor  Wright  and  his  friends, 
while  the  latter,  headed  by  Preston  King  in  the  House  of 
Representatives  and  sustained  by  the  New  York  Legislature, 
arrayed  the  members  of  Congress  in  both  Houses,  except 
Daniel  S.  Dickinson  in  the  Senate  and  one  Representa- 
tive, against  the  annexation  of  Texas  and  for  the  Wilmot 
Proviso  forbidding  slavery  in  the  territory  acquired  from 
Mexico.  The  Whigs  took  advantage  of  these  conditions  to 
elect  as  governor  in  1848  Hamilton  Fish,  whose  term  closed 
with  credit  and  who  was  succeeded  by  Washington  Hunt 
elected  in  1850, — the  last  governor  of  New  York  furnished 
by  the  Whig  party  before  its  death. 

By  the  sort  of  compromise  by  which  the  Vice-President 
has  often  been  nominated,  Millard  Fillmore  was  named  in 
1848  for  that  position  by  the  Whigs  on  the  ticket  with  Gen- 
eral Taylor.  He  belonged  to  the  conservative  wing  of  the 
party,  the  "Silver-Grays,"  and  was  not  a  favorite  with  the 
free-soil  element  led  by  Mr.  Seward.  By  the  death  of  the 
President,  the  succession  fell  to  Mr.  Fillmore  July  9,  1850. 
He  sustained  the  compromise  measures  of  that  year,  in- 
cluding the  Fugitive  Slave  Law,  and  hastened  to  remove  from 
Federal  places  those  who  had  voted  for  him  but  did  not  favor 
that  policy,  and  appointed  those  who  did.  When  in  1852 
he  sought  the  nomination  for  President,  he  led  all  competi- 
tors in  the  National  Convention  on  the  first  ballot  by  one 


32  PROGRESS  OF  THE  EMPIRE  STATE 

vote,  but  on  the  final  ballot  Winfield  Scott  was  nominated 
for  what  proved  the  empty  honor  of  the  last  Whig  candidacy 
for  chief  magistrate  of  the  republic.  New  York  took  its 
stand  in  the  electoral  college  for  Franklin  Pierce. 

Movements  for  the  organization  of  the  Republican  party 
began  in  New  York.  A  call  was  issued  in  Albany  about  July 
i,  1854,  for  a  State  convention  in  Saratoga  on  August  16th. 
Delegates  were  chosen  in  the  various  counties  by  mass  meet- 
ings, who  denounced  the  Nebraska  Bill  and  the  aggressions 
of  the  slave  power  and  adjourned  to  meet  in  Auburn,  Sep- 
tember 26th,  when  organization  was  perfected  under  the 
name  "Republican"  and  a  full  State  ticket  was  nominated 
with  Myron  H.  Clark  for  governor,  who  had  also  been  desig- 
nated by  a  Whig  convention.  Prohibition  of  the  liquor  traffic 
was  advocated  in  the  platform.  Mr.  Clark  was  elected  by 
a  plurality  of  305  over  Horatio  Seymour,  while  122,282  votes 
were  returned  for  Daniel  Ullman,  candidate  of  the  American 
party.  The  Legislature  enacted  a  rigid  prohibitory  law, 
which  was  declared  unconstitutional  by  the  Court  of  Appeals 
in  March,  1856.  The  policy  of  license  for  the  sale  of  liquors 
has  since  prevailed  under  statutes  of  varying  stringency. 

Millard  Fillmore  was  in  1856  put  in  nomination  for 
President  by  the  American  party;  he  received  in  this  State 
124,604  votes,  in  the  Union  25  per  cent,  of  the  total  cast,  but 
in  the  electoral  college  only  the  eight  ballots  of  Maryland. 
The  New  York  return  showed  276,057  for  John  C.  Fremont, 
and  195,878  for  James  Buchanan,  who  by  the  vote  of  other 
States  was  placed  in  the  presidency.  John  A.  King  was 
chosen  governor,  to  be  succeeded  by  Edwin  D.  Morgan  for 
two  terms  (1858-1862).  To  him,  therefore,  the  task  fell  of 
organizing  the  forces  of  the  commonwealth  for  the  war  for 
the  Union,  and  it  was  performed  with  loyalty  and  efficiency. 

The  citizens  of  New  York  in  i860  by  a  majority  of  50,136 
gave  the  potent  voice  of  the  commonwealth  for  Abraham 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     33 

Lincoln  for  President.  In  the  hope  of  averting  collision, 
delegates  were  sent  to  the  peace  convention  held  in  Wash- 
ington February  4,  1861,  while  the  Legislature  had  already 
(January  11),  by  a  vote  nearly  unanimous,  tendered  to  the 
national  government  whatever  men  and  money  it  might 
need  to  maintain  its  authority.  Other  views  found  expres- 
sion in  memorials  to  Congress  and  in  mass  meetings.  In 
Albany  a  resolution  was  passed  that"civil  war  will  not  restore 
the  Union,  but  will  defeat  forever  its  reconstruction."  Yet 
the  Legislature  when  the  first  gun  was  fired  appropriated 
#3,000,000  for  war  purposes  and  gave  the  governor  full  pow- 
ers to  enlist  men  for  two  years  and  to  equip  regiments.  The 
Secretary  of  the  Treasury  reported  that  of  #260,000,000  first 
raised  by  loans  to  the  nation,  #210,000,000  came  from  this 
State. 

The  men  opposed  to  the  war  won  allies  at  the  polls  in 
1862  from  those  who  did  not  approve  of  the  way  in  which  it 
was  conducted.  They  elected  Horatio  Seymour  governor, 
who  in  the  canvass  proclaimed  the  duty  of  maintaining  the 
Union  by  arms.  The  draft  for  men  for  military  service 
ordered  by  the  national  government  was  met  by  protests  at 
several  points  and  by  riots,  arson,  and  bloodshed  in  the  chief 
city  on  Monday,  July  13,  1863.  Colored  people  were  abused, 
a  colored  asylum  was  burned,  and  several  of  the  race  were 
killed.  Out  of  fifty  marines  called  to  enforce  order,  several 
were  killed  and  others  bruised.  Governor  Seymour  de- 
clared the  city  in  a  state  of  insurrection,  for  business  was 
stopped,  the  lives  of  citizens  were  put  in  peril,  and  fires 
which  were  set  by  the  mob  destroyed  much  property.  Fed- 
eral troops  were  called  in,  whom  the  rioters  fought  against. 
After  four  days  the  authorities  gained  control,  but  in  that 
period  at  least  a  thousand  persons  were  killed  or  wounded, 
and  #2,000,000  worth  of  property  was  destroyed.  Less  seri- 
ous riots  occurred  in  Brooklyn,  Troy,  and  Jamaica.     By  the 


34  PROGRESS  OF  THE  EMPIRE  STATE 

draft  only  2557  conscripts  were  obtained  in  the  State  for  the 
army,  while  in  the  same  year  nearly  50,000  volunteers  went 
into  the  field.  The  Legislature  and  the  counties  and  towns 
offered  liberal  bounties  for  recruits,  and  by  the  close  of  1864 
New  York  had  to  its  credit  an  excess  of  5301  above  its 
quota. 

Charges  were  made  in  high  quarters  that  fraud  and  vio- 
lence were  to  be  used  to  control  the  presidential  election  in 
1864.  Raids  from  Canada  were  apprehended;  the  recent 
draft  riots  suggested  the  type  of  danger  liable  to  befall  New 
York  City,  and  rumors  of  plots  to  burn  Northern  cities  as 
acts  in  the  war  were  circulated.  The  State  officials  did  not 
favor  Federal  interference,  but  the  President  and  Secretary 
of  War  deemed  it  necessary  to  send  an  army  of  7000  men  to 
keep  the  peace  and  safeguard  the  polls  in  the  city.  Order 
prevailed  when  the  votes  were  cast  and  counted,  and  the 
ballots  of  soldiers  in  the  field  were  for  the  first  time  included. 
New  York  electors  were  recorded  for  Mr.  Lincoln  for  his  sec- 
ond term.  At  the  same  time  Reuben  E.  Fenton  was  chosen 
governor,  and  he  was  to  be  reelected  in  1866,  and  to  be 
transferred  in  1869  to  the  United  States  Senate.  He  was 
diligent  and  sagacious,  a  master  of  organization,  and  well 
versed  in  knowledge  of  men. 

The  War  Department  credited  New  York  with  448,850 
men  for  the  war  for  the  Union  sent  into  the  field  for  periods 
from  three  months  to  three  years,  and  with  18,197  who 
paid  commutation,  or  a  total  of  467,047.  Bounties  to 
recruits,  paid  by  the  State,  counties,  and  towns,  amounted 
to  #86,629,228.  Private  gifts  for  the  war  were  on  a  like 
scale  of  munificence. 

In  the  presidential  election  of  1868  New  York  was  not  the 
controlling  factor  that  it  had  often  been  before  and  was  to 
be  again.  Horatio  Seymour  counseled  his  personal  friends 
that  the  Democratic  party  could  hope  for  success  in  the  can- 


SILAS  D.  WEBB 

Came  to  New  York  to  engage  in  business  in  1857;  went  to 
China  in  1865  and  remained  there  for  fifteen  years  engaged  m 
the  Oriental  trade  with  Ameriea.  He  returned  to  the  United 
States  in  1880;  was  for  many  years  vice-president  and  afterwards 
president  of  the  China  and  Japan  Trading  Co.  Mr.  Webb  has 
been  for  many  years  a  member  of  the  Chamber  of  Commerce  and 
the  Merchants'  Association,  in  both  of  which  he  has  served  on 
important  committees.  He  is  a  member  of  the  Executive  Com- 
mittee of  the  American  Asiatic  Association  and  of  the  Downtown 
Association. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     35 

vass  only  with  a  candidate  who  could  draw  outside  support; 
but  the  nomination  was  forced  upon  him  only  to  verify  his 
prediction.  He  carried  his  own  State,  but  General  Grant 
was  elected.  This  new  President  summoned  to  be  Secretary 
of  State  Hamilton  Fish,  who  had  been  Governor  of  New  York 
and  United  States  Senator.  From  1869  to  1877  at  the  head 
of  the  State  Department,  he  commanded  confidence  and  favor 
at  home  and  abroad,  and  the  treaty  of  Washington  is  a  monu- 
ment to  him  in  the  world's  diplomacy.  John  T.  Hoffman  was 
chosen  governor  in  1868  and  secured  a  second  term  in  1870. 
Corruption  was  exposed  in  the  metropolis  and  the  Legislature, 
and  in  1871  two  justices  of  the  Supreme  Court  and  a  judge 
of  the  Superior  Court  of  the  chief  city  were  impeached  for 
official  malfeasance.  The  last  and  one  of  the  former 
were  removed  from  the  bench,  and  the  third  resigned  to 
escape  trial. 

The  canvass  for  President  in  1872  was  rendered  spectacu- 
lar by  the  choice  of  Horace  Greeley,  editor  of  the  New  York 
Tribune,  as  a  candidate  first  by  the  new  liberal  party  and 
then  by  the  Democrats.  He  sought  support  by  appealing  to 
the  sections  to  "clasp  hands  across  the  bloody  chasm"  of 
the  war.  New  York  at  the  polls  pronounced  in  favor  of  the 
continuance  of  General  Grant  in  the  presidency  and  the 
majority  of  the  States  sustained  that  verdict.  For  governor 
John  A.  Dix  was  designated  and  elected.  He  had  sat  in  the 
United  States  Senate  (1845-49)  ar)d  in  December,  i860, 
was  summoned  by  President  Buchanan  to  take  up  the  port- 
folio of  Secretary  of  the  Treasury.  As  such  he  gave  the  order 
to  the  commandant  of  a  revenue  cutter  at  New  Orleans: 
"If  any  man  attempts  to  haul  down  the  American  flag,  shoot 
him  on  the  spot."  He  was  appointed  Major-General  of 
Volunteers  in  May,  1861.  As  governor  he  aimed  at  reform 
in  political  affairs  and  aggrieved  some  of  the  leaders;  a 
veto  of  an  act  for  local  option  relative  to  the  liquor  traffic 


36  PROGRESS  OF  THE  EMPIRE  STATE 

lost  him  friends.  When  renominated  in  1874,  he  was  not 
successful  at  the  ballot-box. 

The  management  of  the  canals,  and  a  system  of  repairs 
on  them  by  contract,  developed  waste  and  fraud.  By  a 
convention  and  by  the  Legislature,  abuses  were  condemned 
and  remedies  demanded,  and  by  new  laws  as  well  as  through 
the  courts,  vigorous  action  was  taken.  Samuel  J.  Tilden 
waged  bold  war  against  corruption  in  the  city  of  New  York 
where  it  had  become  monstrous,  and  he  enlisted  heartily  in 
the  fight  against  the  "canal  ring."  He  had  served  in  the 
Assembly  and  in  two  Constitutional  conventions.  Elected 
governor  in  1874,  he  pressed  the  crusade  with  skill  and  en- 
ergy, while  he  organized  his  party  with  tact  and  adroit  force, 
such  as  it  had  not  known  since  the  days  of  Van  Buren. 

So,  naturally,  while  Tammany  Hall  opposed  him,  the 
National  Democratic  Convention  selected  him  in  1876  as 
candidate  for  President  on  the  pleas  of  "national  regenera- 
tion and  reform."  His  State  cast  its  electoral  vote  for  him, 
but  the  commission  appointed  by  Congress  on  the  contested 
States  awarded  the  presidency  to  his  Republican  antagonist, 
Rutherford  B.  Hayes.  Mr.  Tilden  rejected  the  counsel  of 
some  of  his  friends  to  protest  the  decision  in  the  courts,  or 
by  armed  force  as  urged  by  the  extremists.  Mentioned  for 
nomination  again  in  1880  and  in  1884,  he  declined  to  enter 
the  canvass. 

Roscoe  Conkling,  who  was  prominent  'in  both  houses 
of  Congress  during  his  service  there,  was  presented  to  the 
Republican  National  Convention  of  1876  by  a  majority  of 
the  delegates  from  the  State,  and  the  first  ballot  showed  99 
members  in  his  favor. 

With  Mr.  Hayes  the  second  place  was  bestowed  on  Wil- 
liam A.  Wheeler  of  this  State,  eminent  as  State  Senator, 
president  of  the  Constitutional  Convention  of  1867,  and  as 
Representative  in  Congress.     President  Hayes  selected  his 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     37 

Secretary  of  State  from  New  York  in  the  person  of  William 
M.  Evarts,  a  leader  at  the  bar  but  not  a  practical  politician; 
rather  a  scholar  and  statesman.  He  was  chairman  of  the  New 
York  delegation  at  the  ;Republican  National  Convention 
of  i860,  was  counsel  for  President  Johnson  in  the  impeach- 
ment trial,  and  for  Mr.  Hayes  before  the  Electoral  Commis- 
sion. He  argued  the  American  case  in  the  Alabama  Claims, 
and  was  Attorney-General  under  President  Johnson.  He 
served  in  the  national  Senate  from  1885  to  1891. 

Factional  fights  arose  in  the  State  over  federal  patronage 
immediately  on  the  inauguration  of  President  Hayes,  who 
had  not  followed  the  advice  of  local  leaders.  The  Repub- 
lican State  Convention  rejected  an  amendment  declaring 
his  title  perfect  and  approving  his  policy,  while  it  adopted 
unfriendly  resolutions. 

Lucius  Robinson  was  elected  governor  as  a  Democrat 
in  1876,  but  three  years  later  Tammany  delegates,  resenting 
his  nomination,  organized  a  separate  convention  and  nomi- 
nated John  Kelly,  making  easy  the  transfer  of  the  executive 
chair  to  Alonzo  B.  Cornell,  Republican,  who  had  been 
Speaker  of  the  Assembly  in  1873,  and  who  took  an  active 
part  as  trustee  in  the  management  of  the  University  founded 
by  his  father. 

The  presidency  was  the  occasion  in  1880  of  fresh  strife 
and  bitter  dissension  in  New  York.  The  Republican  State 
Convention  instructed  the  delegates  from  the  districts  as 
well  as  those  at  large  to  "use  their  most  earnest  and  united 
efforts  to  secure  the  nomination"  of  General  Grant  for  a 
third  term.  Several  of  them  refused  to  obey  these  instruc- 
tions and  joined  with  the  majority  in  the  national  body  in 
naming  James  A.  Garfield.  The  vice-presidency  was  con- 
ceded to  Chester  A.  Arthur  of  New  York.  The  appoint- 
ment to  the  post  of  Collector  of  the  Port  of  New  York  of 
William  H.  Robertson,  the  leader  of  the  minority  in  the  dele- 


38  PROGRESS  OF  THE  EMPIRE  STATE 

gation  which  aided  to  nominate  President  Garfield,  led  to 
the  resignation  from  the  Senate  of  Thomas  C.  Piatt  and 
Roscoe  Conkling,  and  of  Thomas  L.  James  as  Postmaster 
General.  Excitement  rose  to  fever  heat,  and  ;the  Senators 
struggled  hard  to  be  returned  as  a  rebuke  to  the  President. 
The  Legislature,  after  six  weeks  of  balloting,  preferred  to 
send  Warner  Miller  and  Elbridge  G.  Lapham. 

By  the  murder  of  President  Garfield  by  the  assassin  Gui- 
teau,  Vice-President  Arthur  was  promoted  to  the  chief  magis- 
tracy September  20,  1881.  He  reconstructed  the  Cabinet 
and  adopted  a  policy  of  his  own,  which  did  not  win  the  full 
approval  of  either  faction  in  his  party.  He  took  as  his  Secre- 
tary of  the  Treasury  Charles  J.  Folger  of  New  York,  who  had 
earned  distinction  in  the  State  Senate  and  resigned  as  Chief 
Justice  of  the  Court  of  Appeals  to  go  to  Washington.  He  be- 
came a  candidate  for  governor  in  the  canvass  of  1882, and  was 
regarded  as  the  special  representative  of  the  national  admin- 
istration. Alleged  frauds  in  the  use  of  proxies  in  the  State 
Committee  controlled  the  organization  of  the  convention  and 
incited  popular  revolt.  His  defeat  by  the  immense  plural- 
ity of  192,854  was  no  imputation  on  his  worth  as  a  citizen  or 
his  integrity  as  a  statesman,  but  was  one  of  the  thunder 
storms  which  at  intervals  clear  the  political  atmosphere.  It 
produced  results  in  national  affairs  which  the  chief  actors 
in  the  revolt  did  not  seek. 

The  beneficiary  was  Grover  Cleveland,  who  was  nomi- 
nated by  the  Democrats  and  received  the  support  of  the 
dissenting  Republicans.  He  became  the  logical  candidate 
of  his  party  for  President  in  1884,  although  some  of  the  dele- 
gates from  the  State  in  theNational  Convention  did  not  favor 
him.  In  the  canvass  a  diversion  was  attempted  by  the 
National  Greenback  party  for  Benjamin  F.  Butler,  while 
the  Prohibitionists  were  zealous  and  urgent.  The  official 
returns  were  needed  to  prove  the  decision  in  the  State;  they 


CORNELIUS  N.  BLISS 

Merchant;  born  in  Fall  River,  Mass.,  January  26,  1833.  Began 
drygoods  business  in  a  Boston  house;  later  partner  of  commission 
firm  of  John  S.  and  Eben  Wright  &  Co.  Head  of  branch  house 
opened  in  New  York,  of  Wright,  Bliss  &  Fabyan,  subsequently 
reorganized  under  name  of  Bliss,  Fabyan  &  Co.  Delegate  to 
various  state  and  national  conventions.  Chairman  New  York 
State  Republican  Convention,  1887.  President  of  Protective 
Tariff  League;  treasurer  National  Republican  Committee,  1892, 
1900,  and  1904.  Secretary  of  Interior  in  President  Mc- 
Kinlcy's  Cabinet,  1897-1898.  Director  Fourth  National  Bank, 
Equitable  Life  Assurance  Society,  Home  Insurance  Co.;  trustee 
Central  Trust  Co.  and  American  Surety  Co.  President  Union 
League  Club  in  1892,  1893,  and  1894.  Vice-president  Chamber 
of  Commerce,  and  president  of  New  York  Hospital.  Died 
October  9,  191 1. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     39 

finally  gave  a  plurality  of  1077  to  1149  for  the  electors  fav- 
oring Mr.  Cleveland,  and  the  potent  voice  of  New  York  be- 
stowed upon  him  the  presidency.  In  his  behalf  were  arrayed 
the  advocates  of  free  trade,  the  citizens  who  believed  radical 
reform  was  needed  in  national  affairs,  and  the  personal  and 
factional  enemies  of  the  opposing  candidate,  James  G. 
Blaine.  Some  of  the  local  Democratic  leaders  resented  Mr. 
Cleveland's  independence,  but  he  was  nominated  for  a  second 
term  in  1888,  by  his  own  State  and  the  National  Convention, 
to  find  a  plurality  of  13,002  against  him  at  the  polls  here, 
while  in  the  electoral  college  the  record  was  168  for  him  and 
233  for  Benjamin  Harrison  of  Indiana.  The  scales  changed 
in  1892.  Although  the  Democrats  in  State  Convention 
instructed  their  delegates  in  favor  of  David  B.  Hill,  the 
National  Convention  preferred  Mr.  Cleveland.  New  York 
pronounced  in  his  favor  by  45,513  plurality  and  restored  him 
to  the  chief  magistracy  of  the  republic.  After  his  retirement 
he  made  his  home  in  his  native  State,  New  Jersey,  but  he 
owed  his  political  elevation  to  this  commonwealth,  to  which 
his  two  terms  as  President  are  due  and  of  whose  annals  his 
fame  is  a  part. 

In  the  Republican  party  Chester  A.  Arthur  sought  the 
nomination  in  1884,  to  succeed  himself.  He  was  not 
supported,  however,  by  a  majority  of  the  New  York 
delegates  to  the  National  Convention  who  aided  in  mak- 
ing Mr.  Blaine  the  candidate.  In  1885  David  B.  Hill 
was  elected  Governor,  in  continuance  of  service  as  Lieu- 
tenant-Governor following  the  transfer  of  Mr.  Cleveland 
to  Washington;  he  was  chosen  again  in  1888,  and  was  also 
made  United  States  Senator  in  1891.  There  he  did  not 
generally  support  Mr.  Cleveland's  policies.  He  was  the 
head  of  a  wing  of  his  party,  recognized  as  an  adroit  manager, 
a  trained  lawyer,  and  a  powerful  influence  in  politics.  He 
was  able  to  secure  the  delegation  from  his  State  for  President 


40  PROGRESS  OF  THE  EMPIRE  STATE 

in  1892  and  was  suggested  again  in  1896,  but  was  not  to 
grasp  the  great  prize.  His  last  appeal  to  the  people  was  in 
1894,  when  in  the  face  of  a  Republican  tidal  wave  he  led  a 
forlorn  hope  for  governor. 

Once  again,  in  1888,  the  vice-presidency  came  to  New 
York.  Levi  P.  Morton  gave  strength  to  the  ticket  of  Ben- 
jamin Harrison  and  to  his  administration.  As  Minister  to 
France  he  had  a  creditable  record.  He  was  chosen  governor 
over  Senator  Hill  in  1894,  rendering  such  excellent  service 
that  the  Republican  State  Convention  called  for  his  promo- 
tion to  the  presidency  in  1896,  but  the  current  for  William 
McKinley  carried  all  before  it. 

The  governorship  in  1891  went  to  Roswell  P.  Flower, 
who  had  been  a  merchant  in  Watertown  and  became  a 
banker  in  New  York  engaged  in  large  affairs.  He  combined 
an  attractive  address  with  ability  in  organization.  His  plu- 
rality was  47,937,  and  his  services  as  chief  magistrate  led  his 
friends  to  deem  him  of  caliber  fitted  for  the  presidency. 

With  General  Harrison  in  his  second  canvass  was  associ- 
ated Whitelaw  Reid.  Editor  of  the  New  York  Tribune, 
Minister  to  France  where  he  strove  for  reciprocity, he  served 
as  special  ambassador  to  Great  Britain  both  at  the  jubilee  of 
Queen  Victoria  and  at  the  coronation  of  King  Edward;  he 
gave  strength  and  wisdom  to  the  commission  which  framed 
the  treaty  of  peace  with  Spain ;  he  graced  the  post  of  ambas- 
sador to  Great  Britain,  while  his  name  as  a  scholar  and  diplo- 
mat ranks  with  the  highest;  when  in  191 2  he  died  in  London 
the  expressions  of  grief  in  Great  Britain  were  general  and 
impressive.  Public  as  well  as  private  honors  were  paid  to 
him  in  all  parts  of  the  kingdom,  and  his  remains  were  sent 
to  New  York  in  a  British  battle  ship. 

His  immediate  predecessor  as  ambassador  to  Great  Brit- 
ain was  Joseph  H.  Choate  who  had  served  as  president  of 
the  Constitutional  Convention  of  1894.     His  prosecution  of 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     41 

the  Tweed  crimes  called  out  his  force  and  ability  as  a  lawyer, 
conspicuous  also  in  other  celebrated  cases.  He  has  added 
new  chapters  to  the  history  of  American  oratory,  while  as 
a  humorist  he  has  created  a  school  of  his  own  for  banquets 
and  popular  assemblies.  Appointed  to  the  diplomatic  serv- 
ice by  President  McKinley  in  1899,  he  won  the  warmest 
praises  in  the  country  to  which  he  was  commissioned,  while 
retaining  the  admiration  of  his  native  land. 

With  him  was  associated  in  the  Constitutional  Conven- 
tion Elihu  Root,  one  of  the  delegates  at  large.  Designated 
as  chairman  of  the  Committee  on  the  Judiciary,  his  talents 
and  learning  in  the  law  made  him  a  leader  in  important  work 
to  the  advantage  of  the  commonwealth.  On  President  Mc- 
Kinley's  invitation  he  took  up  the  portfolio  of  Secretary  of 
War,  returning  to  his  profession,  only  to  be  summoned  by 
Mr.  Roosevelt  to  the  higher  station  of  Secretary  of  State.  He 
justified  the  choice  by  broad  views  and  energetic  services. 
By  an  official  visit  to  the  republics  of  South  America  he 
extended  the  influence  of  this  country  and  set  in  motion  en- 
during forces  for  peace  and  for  the  extension  of  the  commerce 
of  the  United  States.  In  1909  he  was  elected  to  the  national 
Senate  and  promptly  took  rank  with  the  foremost  members. 
In  the  exciting  convention  which  renominated  President 
Taft  in  191 2,  Mr.  Root  was  temporary  chairman  and  held 
the  gavel  firmly  over  the  excited  heads  of  the  supporters  of 
the  two  rival  candidates. 

With  reputation  as  Representative  in  Congress  and  for 
brave  work  against  election  frauds  in  Troy,  Frank  S.  Black 
was  elected  governor  in  1896  by  a  plurality  of  213,052.  In  his 
message  he  recommended  action  to  render  the  civil  service 
rules  practical,  rebuked  the  scandals  of  waste  in  the  man- 
agement of  the  Capitol,  the  use  of  the  #9,000,000  appropria- 
tion for  the  canals,  discussed  the  excise  laws,  and  suggested 
improvements  in  the  conduct  of  prisons  and  charities.     He 


42  PROGRESS  OF  THE  EMPIRE  STATE 

was  friend  of  the  libraries  and  of  the  university  of  the 
State.  He  labored  successfully  for  the  preservation  of  our 
forests,  and  the  Adirondack  park  is  in  large  measure  due  to 
him. 

Theodore  Roosevelt  passed  early  to  the  center  of  the 
national  stage.  Trained  in  the  New  York  State  Assembly,  on 
the  United  States  Civil  Service  Commission  and  the  Police 
Commission  of  New  York,as  Assistant  Secretary  of  the  Navy, 
with  laurels  fresh  from  the  war  with  Cuba,  he  was  chosen 
Governor  in  1898.  As  executive  of  the  State  he  denounced 
frauds  on  the  canals,  recommended  changes  in  the  methods 
of  taxation,  dealt  with  corporations  and  their  franchises, 
with  charities  and  education,  with  the  labor  laws,  gave  promi- 
nence to  regulation  of  the  civil  service,  and  urged  publicity 
as  a  cure  for  abuses  in  trusts.  In  1900  he  was  nominated 
to  be  Vice-President.  The  weapon  which  murdered  Mr. 
McKinley  lifted  him  to  the  chief  magistracy  September  14, 
1901 .  Mr.  Roosevelt  is  the  ninth  Vice- President  selected  from 
New  York,  and  the  third  to  ascend  to  the  executive  chair  by 
the  death  of  his  predecessor.  He  is  the  third  New  Yorker 
to  be  elected  to  the  chief  magistracy  of  the  republic,  one  of 
the  three  having  served  two  terms. 

In  1900  Benjamin  B.  Odell,  Jr.,  was  elected  governor  by 
111,000  majority,  and  came  to  the  executive  chair  after  two 
terms  of  influential  service  in  the  national  House  of  Repre- 
sentatives. For  reelection  in  1902,  he  had  a  close  fight  with 
Bird  S.  Coler,  Comptroller  of  the  City  of  New  York,  and 
won  by  only  9752  votes.  A  goodly  share  of  the  credit  for 
the  barge  canal  belongs  to  him,  for  he  advocated  it  with 
energy  and  tact.  He  devoted  himself  to  radical  changes 
in  methods  of  taxation,  especially  the  removal  of  burdens 
from  land. 

His  successor  as  chief  magistrate  was  Frank  W.  Higgins, 
elected  in  1904  by  a  plurality  of  81,607.     When,  in  1893,  he 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     43 

waselected  to  the  Senate  of  the  State,  he  was  engaged  in  vari- 
ous extensive  business  enterprises,  including  groceries,  which 
he  ran  on  a  cooperative  basis.  In  his  messages  he  recom- 
mended the  repeal  of  the  tax  on  the  surplus  of  savings  banks; 
he  labored  also  to  reduce  the  cost  of  gas,  and  to  meet  the 
abuses  in  life  insurance  he  called  for  the  investigation  by  the 
Legislature  which  resulted  in  the  new  laws  of  1906. 

New  York  furnished  in  1904  the  candidates  of  both  the 
great  parties  for  the  presidency.  The  strength  of  his 
administration  and  the  lusty  prosperity  of  the  country  made 
Mr.  Roosevelt  invincible  at  the  polls.  His  antagonist,  Alton 
B.  Parker,  was  well  versed  in  politics,  but  his  reputation  was 
in  largest  measure  derived  from  his  ability  as  a  lawyer  and 
his  learning  and  fairness  on  the  bench  of  the  highest  courts 
of  the  State.  He  resigned  the  post  of  chief  judge  of  the  Court 
of  Appeals  to  enter  the  canvass,  and  at  its  close  returned  to 
the  practice  of  his  profession,  to  be  conceded  a  rank  with  the 
foremost  in  the  metropolis.  Mr.  Roosevelt's  plurality  in 
the  State  was  175,552,  and  in  the  electoral  college  he  received 
336  votes  to  140  for  Mr.  Parker. 

Because  of  the  scandals  which  broke  out  in  the  great  life 
insurance  companies,  an  investigation  into  their  manage- 
ment was  ordered  by  the  Legislature,  and  Charles  E.  Hughes, 
a  young  attorney  of  New  York  City,  was  appointed  counsel 
of  the  investigating  committee.  He  conducted  the  exami- 
nation with  such  earnestness  and  keenness  as  to  earn  the 
public  confidence  and  admiration.  As  a  result  he  was  nomi- 
nated by  the  Republicans  for  governor  in  1906  and  elected 
by  a  plurality  of  57,897,  and  chosen  in  1908  for  a  second  term 
by  69,479.  On  his  urgent  recommendation,  betting  on  race 
tracks  was  prohibited  after  a  sharp  contest.  He  urged,  by 
official  message  and  on  the  popular  platform,  provision  for 
direct  nominations  for  office  under  legal  forms,  but  the  Legis- 
lature failed  to  enact  his  measures.     More  success  attended 


44  PROGRESS  OF  THE  EMPIRE  STATE 

his  plans  for  commissions  to  oversee  public  utilities,  and 
much  benefit  has  been  secured  by  them  in  the  work  of 
transportation,  telegraphs,  and  telephones.  President  Taft 
appointed  him  a  justice  of  the  Supreme  Court  of  the  United 
States,  and  to  accept  that  high  station  he  resigned  as  gover- 
nor in  October,  1910;  Horace  White,  the  lieutenant-gover- 
nor, by  constitutional  requirement  filled  the  vacancy  for 
the  remainder  of  the  year. 

In  1908,  on  the  nomination  of  William  H.  Taft  for  Presi- 
dent, the  Republican  Convention  turned  to  New  York  once 
more  for  a  Vice-President.  James  S.  Sherman  had  won  rank 
in  the  House  of  Representatives  as  wise  counselor  and  an 
adept  parliamentarian.  From  1886,  when  he  became  a 
member,  he  was  reckoned  among  the  most  influential  and 
most  popular  of  the  representatives.  As  president  of  the 
Senate  he  had  the  duty  of  settling  ties  on  votes  of  vital  sig- 
nificance, and  compelled  respect  for  his  sagacity  and 
courage. 

The  canvass  of  1910  began  with  a  spectacular  strife  for 
chairmanship  of  the  Republican  State  Convention.  The 
State  Committee,  according  to  custom,  had  named  a  chair- 
man and  proposed  Vice-President  Sherman  for  the  posi- 
tion. Ex-President  Roosevelt  became  a  candidate  and  was 
supported  with  heat  and  persistence.  The  controversy  de- 
veloped some  temper  and  Mr.  Roosevelt  was  chosen  and  his 
partisans  controlled  the  nominations.  For  governor  Henry 
L.  Stimson  was  presented.  The  Democrats  drafted  John 
A.  Dix  to  head  their  ticket  and  he  was  successful  at  the 
polls  by  a  plurality  of  67,401.  Mr.  Stimson  entered  Presi- 
dent Taft's  Cabinet  as  Secretary  of  War  in  May,  191 1.  The 
election  gave  the  Democrats  control  of  the  'Legislature  as 
well  as  of  the  executive  departments.  James  A.  O'Gorman 
was  sent  to  the  United  States  Senate.  Mr.  Dix  in  the  can- 
vass had  called  for  honesty  in  the  administration,  and  de- 


LYMAN  JUDSON  GAGE 

Ex-Sccrctary  of  the  Treasury;  born  in  De  Ruyter,  Ma 
County,  N.  Y.,  June  28,  1836;  son  Eli  A.  and  Mary  (Judson) 
Gage;  removed  to  Rome,  N.  Y.,  1848;  educated  Rome  Academy; 
LL.D.,  Beloit,  1897;  New  York  University,  1903.  At  age  of 
seventeen  entered  Oneida  Central  Bank ;  served  as  office  boy  and 
junior  clerk  until  1855,  when  he  went  to  Chicago;  clerk  in  planing 
mill  until  1858;  bookkeeper,  1 858-1 861,  and  cashier,  1861-1868, 
Merchants'  Loan  &  Trust  Co.;  became,  in  1868,  cashier,  in  1882, 
resident,  and  in  1891,  president,  First  National  Bank  of 
Chicago;  Secretary  of  the  Treasury  in  Cabinet  of  Presidents 
McKinley  and  Roosevelt,  1897-1902;  president  United  States 
Trust  Co.,  New  York,  1902-1906;  retired,  1906.  Was  first 
president  board  of  directors  Chicago  Exposition;  three  times 
president  American  Bankers'  Association;  first  president  Chicago 
Bankers'  Club;  twice  president  Civic  Federation  of  Chicago; 
trustee  Carnegie  Institution,  Washington. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     45 

nounced  extravagance,  insisting  that  unnecessary  taxation  is 
confiscation.  The  Legislature  sat  for  nearly  seven  months 
and  then  took  a  recess  until  September.  For  the  first  time  in 
over  five  years  a  direct  tax  was  levied,  which  was  estimated 
to  produce  #8,000,000.  Sharp  controversy  arose  over  direct 
nominations  and  betting  on  race  tracks,  a  land  tax  was  re- 
newed and  marked  changes  were  made  with  reference  to 
the  National  Guard.  On  other  matters  Governor  Dix  used 
the  veto  power  with  much  freedom. 

The  Democratic  State  convention  in  191 2  passed  re- 
solutions highly  commending  the'administration  of  Gover- 
nor Dix,  but  nominated  to  take  his  place  William  Sulzer, 
who  having  served  as  a  young  man  in  the  Assembly  at 
Albany  had  won  rank  and  experience  by  twenty  years  in 
Congress  where  he  attained  the  chairmanship  of  the  Com- 
mittee on  Foreign  Affairs.  Mr.  Sulzer  was  elected  Governor 
by  a  plurality  of  205,454  over  J0D  E.  Hedges,  republican, 
his  chief  competitor. 

Into  the  presidential  election  a  novel  factor  was  injected, 
when  Theodore  Roosevelt  became  a  candidate  and  asked 
for  a  third  term.  In  the  Republican  National  Convention 
bitter  strife  developed.  Mr.  Taft  was  nominated  by  the 
votes  of  561  delegates,  while  Mr.  Roosevelt  received  107 
and  344  were  not  recorded.  The  New  York  delegation  was 
divided,  76  members  supporting  President  Taft,  with  8  for 
Roosevelt  and  6  not  voting.  The  dissentients  followed  Mr. 
Roosevelt  in  a  diversion,  and  named  him  as  the  candidate 
for  president  of  the  Progressive  party.  The  democrats, 
inspired  by  lively  hopes,  presented  Woodrow  Wilson  for 
chief  magistrate,  and  with  less  than  a  majority  of  the  popu- 
lar vote,  he  received  in  the  electoral  college,  435  votes; 
Roosevelt,  91;  and  Taft,  8.  For  Vice-President,  without 
effort  on  his  part,  James  S.  Sherman  was  renominated,  the 
first  of  his  party  to  receive  that  distinction.     The  national 


46  PROGRESS  OF  THE  EMPIRE  STATE 

convention  cast  597  votes  for  him,  while  4  were  scattering 
and  352  were  not  recorded.  : 

In  the  State  of  New  York  the  returns  of  the  balloting 
gave  Wilson  647,253;  Taft,  452,745;  Roosevelt,  382,709; 
Debs,  63,381  and  Chafin,  19,427. 

On  October  30,  at  the  climax  of  the  campaign,  Vice- 
President  Sherman  died  at  his  home  in  Utica.  His  impaired 
health  had  forbidden  him  to  take  his  usual  leading  part  in 
party  councils  and  to  stir  by  his  forceful  addresses  the  large 
audiences  which  were  wont  to  greet  him.  His  physical 
forces  were  worn  out  in  his  public  labors  and  his  extensive 
business  enterprises,  and  he  passed  away  in  the  midst  of 
his  activities,  in  the  very  presence  of  the  people.  His 
funeral  at  Utica  was  attended  by  the  President  of  the 
United  States,  Justices  of  the  Supreme  Court,  many  mem- 
bers of  both  Houses  of  Congress  and  notables  from  all  parts 
of  the  country. 

Among  the  many  hundreds  of  men  who  have  represented 
New  York  in  the  two  houses  of  Congress  and  as  heads  of 
bureaus  in  the  departments  in  Washington,  not  a  few  have 
been  eminent  for  ability  and  success  in  their  service.  Frank 
Hiscock  in  both  the  House  and  Senate  proved  himself  a 
shrewd  and  painstaking  legislator.  Chauncey  M.  Depew  has 
a  wide  reputation  as  an  orator  and  man  of  affairs,  enhanced 
on  the  floor  of  the  Senate.  Francis  E.  Spinner,  Treasurer  of 
the  United  States  during  the  war  for  the  Union  and  after- 
wards, honored  his  State  and  the  nation.  Sereno  E.  Payne 
gave  his  name  to  the  tariff  of  1909,  which  he  reported  from 
the  Committee  on  Ways  and  Means.  Other  names  are 
numerous  of  men  who  in  legislation  and  administration  have 
helped  to  prove  that  this  commonwealth  does  its  full  share 
of  the  work  of  the  republic. 

Governor  Van  Twiller  in  1633  brought  Adam  Roelandsen 
from  Holland  to  be  the  first  schoolmaster  in  New  Netherland. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     47 

This  was  the  first  seed  of  public  education  in  this  domain. 
The  schools  of  New  York  within  a  generation  drew  pupils 
from  as  far  away  as  Virginia  and  the  Carolinas.  An  act, 
passed  in  1722,  for  free  schools  was  a  promise  which  did  not 
at  once  bear  fruit.  King's  College,  established  in  1746,  grew 
into  the  Columbia  University.  The  Regents  of  the  uni- 
versity date  from  1784,  and  from  them  the  public  schools 
and  higher  institutions  of  learning  have  been  fostered  and 
developed.  The  first  appropriation  by  the  Legislature  was 
granted  in  1795  in  the  sum  of  #50,000.  By  1910  the  total 
cost  of  the  schools  of  all  grades  in  the  State  had  risen  to 
#76,695,317,  while  the  pupils  in  them  numbered  1,840,409, 
with  50,958  teachers.  In  that  year  8837  students  were 
graduated  from  the  high  schools;  1935  from  the  academies; 
and  2536  from  the  normal  and  training  schools. 

While  New  York  has  had  its  full  share  of  political 
agitation,  it  has  lacked  no  element  of  material,  moral  or 
intellectual  development.  Its  industries  have  spreadj  and 
multiplied,  its  facilities  for  transportation  of  commodities, 
persons,  and  thought  have  taken  on  the  latest  devices  of 
science  and  mechanism ;  all  that  the  race  has  learned  to  make 
home  attractive  is  applied  here;  the  march  of  wealth  has 
been  gigantic;  and  the  flower  and  fruitage  of  art,  culture, 
charity,  and  religion  have  blessed  the  people,  as  museums, 
libraries,  hospitals  and  churches  demonstrate. 

In  the  closing  years  of  the  nineteenth  century  and  the 
first  decade  of  the  twentieth,  enterprises  of  vast  magnitude 
went  forward.  The  railroads  constructed  immense  termi- 
nals in  the  metropolis  and  added  to  station  and  freight  facili- 
ties in  the  interior  cities.  Tunnels  were  pierced  under  the 
Hudson  and  East  rivers.  The  underground  railroads  were 
extended,  and  in  191 1  plans  for  further  development  to  cost 
#275,000,000  were  adopted.  The  barge  canal,  to  float  boats 
of  1000  tons  from  the  Great  Lakes  to  tidewater,  was  put 


48  PROGRESS  OF  THE  EMPIRE  STATE 

under  contract  for  fourfifths  of  the  route,  and  a  third  of  the 
work  was  done  by  midsummer  of  191 1.  The  total  cost  is 
estimated  at  $101,000,000.  Canals  have  for  a  century  been 
a  prominent  factor  in  the  politics  as  well  as  the  business  of 
the  commonwealth,  while  the  railroads  have  multiplied  both 
their  freight  and  passenger  traffic.  To  satisfy  the  counties 
distant  from  the  waterways,  $50,000,000  was  voted  to  im- 
prove the  country  roads;  these  extend  over  80,000  miles, 
of  which  2850  are  macadam  while  13,000  have  under  the 
new  policy  been  laid  in  stone.  In  191 2  the  expenditure 
of  $50,000,000  additional  was  authorized.  Public  parks 
have  been  liberally  set  apart  by  State  laws  aided  by  private 
munificence.  Recent  additions  are  on  a  broad  scale.  The 
conservation  of  natural  resources  has  received  popular 
and  legislative  attention.  Forethought  has  been  devoted 
not  only  to  present  demands,  but  to  the  needs  and  well- 
being  of  increasing  millions  of  population. 

Not  until  the  census  of  1820  did  New  York  take  the  first 
rank  in  the  Union  in  population  and  have  the  right  to  the  title 
of  the  Empire  State.  During  the  two  decades  preceding,  it 
gained  783,761  inhabitants,  which  was  a  greater  number  than 
dwelt  at  the  close  of  the  period  in  any  other  State  save 
Pennsylvania  and  Virginia.  In  the  next  two  decades  New 
York  added  1,056,109 — more  than  the  total  of  people  in  1840 
in  any  other  State  except  Ohio,  Pennsylvania,  and  Virginia. 
By  1910  this  commonwealth  had  9,113,614  inhabitants.  In 
the  twenty  years  from  1890  to  1910  the  population  increased 
by  3,1 10,490  and  this  number  was  exceeded  by  the  census  of 
but  four  States, — Missouri,  Massachusetts,  Ohio,  and  Penn- 
sylvania. The  rate  of  increase  in  New  York  in  the  first 
decade  of  the  twentieth  century  was  25.4  per  cent.,  while  in 
the  next  preceding  decennial  period  it  was  21. 1  per  cent. 
This  gain  was  greater  than  anywhere  else  east  of  the  Missis- 
sippi, except  in  Florida,  New  Jersey,  and  West  Virginia. 


PLANTING  AND  GROWTH  OF  THE  EMPIRE  STATE     49 

Since  1790  up  to  the  thirteenth  census  New  York  State  multi- 
plied its  population  twenty-seven  times  and  New  York  City 
ninety-six  times,  while  the  increase  in  the  continental 
United  States  during  the  same  period  was  twenty-three 
times. 

For  1909  the  assessed  valuation  in  real  estate  was 
$9,266,628,484  and  in  personal  property  $555,623,070,  upon 
which  in  1910  the  State  tax  collected  was  $345,476  and  the 
county,  town,  and  school  tax  $147,817,461.  Cities  made 
their  own  levies  in  addition.  The  liquor  tax  produced 
$18,102,822  and  the  corporation  tax  $9,123,738.  The  expen- 
ditures from  the  general  fund  were  $34,791,576  and  from 
the  canal  fund  $16,443,100.  The  canal  debt  is  $41,230,660 
and  that  for  highway  improvement  $16,000,000.  The  tons 
moved  on  the  canals  in  1910  were  3,073,412. 

In  manufactures,  New  York  stands  at  the  head,  and  its 
growth  continues  to  be  rapid  in  its  many  branches.  In  1900 
the  value  of  products  was  $2,175,726,900,  having  more 
than  doubled  in  twenty  years  and  being  more  than  16  per 
cent  of  the  production  of  the  entire  Union.  The  capital 
here  employed  in  manufactures  was  multiplied  more  than 
threefold  in  the  same  period — to  $1,651,210,220,  or  17  per 
cent  of  that  for  the  whole  country,  while  the  wages  paid 
amounted  to  $408,855,652,  or  nearly  18  per  cent  of  those  of 
the  nation. 

Such  development  the  commonwealth  has  achieved  in 
less  than  three  centuries.  In  the  first,  it  scattered  seeds  of 
settlement  by  the  sea  and  beside  the  rivers,  with  much  trial 
and  many  hardships.  With  the  growth  of  youthful  fiber, 
the  second  brought  sterner  conflicts,  not  free  from  fire  and 
bloodshed.  Its  third  century  was  two  decades  old  before 
the  State  showed  its  rounded  form  and  stalwart  sturdiness. 
Although  proud  to  be  a  member  of  the  American  Union, 
it  is  worthy  in  itself  alone  to  be  compared  with  the  great 


50  PROGRESS  OF  THE  EMPIRE  STATE 

powers  of  the  earth — not  with  provinces  or  principalities 
or  dependencies.  In  Europe  only  seven  nations,  and  in  the 
western  hemisphere  only  Brazil  and  Mexico,  have  more  or 
even  so  many  inhabitants  as  New  York,  and  its  rate  of 
increase  exceeds  that  of  any  one  of  them. 


PERRY  BELMONT 

Bom  New  York  City,  December  28,  1851;  eldest  son  of  late 
August  Belmont,  financier;  graduate  of  Harvard  University, 
A.B.  (special  honors  in  history  and  political  economy),  1872; 
took  course  in  civil  law,  University  of  Berlin,  then  at  Columbia 
Law  School;  LL.D.  knitted  to  bar,  1876;  practised  law 

until  1  1  Congress  as  a  Democrat  from  1st  New  York 

Distri  asecutive  terms,  1881-89;  chairman  Committeeon 

Foreign  Affairs,  1885-88;  United  States  Minister  to  Spain,  1888- 
89;  In  reneral  with  rank  of  Major,  First  Division,  Second 

Army  Corps,  U.  S.  V.,  1898.  Director  of  several  corporations; 
member  Chamber  of  Commerce,  and  member  Metropolitan, 
Knickerbocker,  University,  Union,  and  Manhattan  Clubs  of 
York;  Metropolitan,  Army  and  Navy,  and  other  clubs, 
Washington,  D.  C. 


CHAPTER  II 

THE    INFLUENCE  OF  NEW  YORK  IN  NATIONAL 

AFFAIRS 

BY  PERRY  BELMONT 

FORMING  the  strategic  center  of  the  patriotic  lines 
in  the  War  of  the  Revolution,  the  State  of  New  York 
early  took  a  position  of  leadership  in  the  Federal 
Union  which  has  rarely  been  relinquished  during  a  century 
and  a  quarter  of  national  life.  The  history  of  all  the  States 
justifies  the  claim  that  each,  according  to  its  geographical 
position  and  the  relative  importance  of  its  population,  has 
had  its  individual  influence  upon  national  affairs;  but  from 
the  moment  political  parties  assumed  definite  form,  New 
York  became  a  pivotal  State  in  presidential  elections. 

There  have  been  only  four  elections  for  the  presidency 
in  which  the  vote  of  New  York  has  not  been  cast  on  the 
winning  side.  On  two  of  these  occasions  its  vote  was  given 
to  New  Yorkers— to  De  Witt  Clinton  in  1812  and  to  Horatio 
Seymour  in  1868.  In  1876  the  vote  of  the  State  was  not 
cast  for  Mr.  Hayes,  the  successful  candidate,  but  it  remains 
true  that  its  electoral  vote  was  given  to  the  candidate,  a 
New  Yorker,  who  received  the  largest  popular  vote  and  who 
carried  the  doubtful  Northern  States. 

Almost  in  every  instance,  excepting  when  the  country, 
by  an  overwhelming  majority,  went  one  way,  as  it  did  in 
1912,  the  electoral  vote  of  New  York  may  be  said  to  have 
decided  presidential  elections.     In  the  first  contest  following 

51 


52  PROGRESS  OF  THE  EMPIRE  STATE 

the  retirement  of  Washington,  John  Adams,  with  one  vote 
to  spare,  would  have  been  defeated  without  the  twelve  votes 
of  New  York.  In  1801,  the  twelve  votes  of  the  State  were 
cast  the  other  way,  for  Jefferson  and  Burr,  and  turned  the 
scale  by  a  vote  of  seventy-three  to  sixty-five  against  Adams. 
Then  came  the  long  period  of  Democratic  ascendancy,  dur- 
ing which  the  country  voted  so  overwhelmingly  for  Jeffer- 
son, Madison,  and  Monroe  that  New  York  only  swelled  the 
majority,  excepting  on  the  occasion,  already  mentioned, 
when  the  electoral  vote  of  the  State  was  cast  for  De  Witt 
Clinton. 

Later,  in  1836,  when  there  were  again  two  well-organized 
political  parties,  the  vote  of  New  York  contributed  to  make 
up  the  170  which  elected  Van  Buren,  against  an  opposition 
vote  of  148.  At  the  next  election  New  York  joined  the 
Whig  reaction  which  followed  the  panic  of  1837  and  brought 
about  the  election  of  Harrison;  but  in  1844  the  State  re- 
turned to  the  Democratic  column  and  gave  Polk  the  votes 
needed  to  win.  Again  in  1848,  when  Taylor  was  elected, 
New  York  cast  its  thirty-six  votes  for  the  successful  Whig 
candidate  and  gave  him  a  plurality  of  exactly  thirty-six 
over  the  Democratic  candidate — partly,  no  doubt,  as  the 
result  of  the  nomination  of  Fillmore  of  New  York  for  Vice- 
President  on  the  Whig  ticket.  The  return  to  Democracy, 
however,  was  so  sweeping  the  next  election  that  New  York's 
vote  was  not  needed,  although  it  joined  in  the  great  majority 
given  to  Franklin  Pierce. 

Then  occurred,  in  1856,  the  vote  which,  in  view  of  the 
State's  position  as  a  reflex  of  the  public  opinion  of  the 
country,  was  perhaps  the  most  significant  ever  cast  by  New 
York.  It  might  have  been  accepted  by  the  upholders  of 
the  slave  power  as  the  handwriting  on  the  wall,  decreeing 
its  final  downfall.  New  York  gave  its  vote  to  John  C. 
Fremont  and  on  the  losing  side  for  the  only  time  when  one 


INFLUENCE  OF  NEW  YORK  IN  NATIONAL  AFFAIRS     53 

of  its  sons  was  not  a  candidate.  It  was  the  prophecy  of 
what  was  to  take  place  among  thevoters  of  the  North  in  i860. 
In  that  year  the  votes  of  New  York  were  given  to  Abraham 
Lincoln.  Without  them  he  would  have  fallen  seven  votes 
short  of  a  majority.  New  York  voted  with  most  of  the 
other  Northern  States  for  Lincoln  in  1864,  but  in  1868  gave 
its  electoral  votes  to  Horatio  Seymour,  its  popular  governor 
and  Democratic  leader.  In  1872  the  revolt  against  Greeley 
gave  the  vote  of  New  York  to  Grant,  but  in  1876  the  State 
returned  to  her  Democratic  allegiance  with  a  large  popular 
plurality  for  Governor  Tilden.  In  1880  the  sentiment  which 
elected  Garfield  carried  the  electoral  votes  of  New  York 
into  the  Republican  column.  Without  them  Garfield  would 
have  lacked  six  votes  of  election. 

In  1884  another  Democratic  governor,  Grover  Cleveland, 
received  the  thirty-six  votes  of  New  York  and  with  them 
secured  a  majority  of  eighteen  in  the  electoral  college.  In 
1888  the  return  to  Republican  policies  gave  the  vote  of  New 
York  to  Harrison,  who  would  have  been  beaten  by  seven 
votes  if  it  had  been  cast  on  the  other  side.  In  1892,  New 
York  swelled  the  popular  majority  for  Mr.  Cleveland, 
although  its  vote  was  not  strictly  necessary  to  have  given 
him  a  majority.  Again,  in  the  three  succeeding  elections, 
the  Republican  majority  was  so  overwhelming  that,  while 
New  York  was  on  the  dominant  side,  its  vote  was  not  needed 
in  a  mathematical  sense  to  make  a  majority.  But  the  great 
influence  of  the  State  extended  to  the  neighboring  States  of 
New  Jersey  and  Connecticut  and  into  all  parts  of  the  Union 
affected  by  its  vast  interests. 

As  a  result  of  its  numerical  importance  in  the  electoral 
college  and  its  political  importance  in  a  general  sense,  New 
York,  after  the  termination  of  the  Virginia  regency,  became 
the  State  to  which  both  political  parties  constantly  turned 
for  the  selection  of  candidates  on  the  presidential  and  vice- 


54  PROGRESS  OF  THE  EMPIRE  STATE 

presidential  tickets.  Even  before  the  dominance  of  Virginia 
had  come  to  an  end,  Aaron  Burr  of  New  York  had  been 
named  by  the  Democrats  as  Vice-President  with  Jefferson. 
When  his  treasonable  conspiracy  brought  his  political  career 
to  an  end,  George  Clinton,  of  New  York,  became  the  Demo- 
cratic Vice-President  for  two  terms,  and  after  an  interval 
of  a  single  term  was  succeeded  by  another  New  Yorker, 
Daniel  D.  Tompkins,  who  also  served  for  eight  years. 
Martin  Van  Buren,  of  New  York,  was  Vice-President  from 
1833  to  1837.  William  A.  Wheeler,  of  New  York,  was  Vice- 
President  from  1877  to  1 88 1,  and  Levi  P.  Morton  from 
1889  to  1893.  Of  the  120  years  under  the  Federal  Consti- 
tution, men  of  New  York  have  held  either  the  presidency 
or  the  vice-presidency  for  terms  aggregating  sixty-four 
years.  While  only  four  of  these  terms  have  come  to  men 
from  New  York  actually  nominated  for  President — Cleve- 
land having  served  two  terms  and  Van  Buren  and  Roosevelt 
one  each — three  other  almost  complete  terms  have  come  to 
New  Yorkers  by  the  death  of  the  President:  to  Fillmore, 
from  1849  to  1853;  Arthur,  from  1881  to  1885;  and  Roose- 
velt, from  1901  to  1905.  This  record,  however,  of  Presidents 
and  Vice-Presidents  actually  elected  does  not  include  the 
defeated  presidential  and  vice-presidential  candidates  who 
have  been  citizens  of  the  State.  Horatio  Seymour  was  the 
Democratic  candidate  in  1868;  Horace  Greeley  and  Charles 
O'Conor  the  two  Democratic  candidates  in  1872;  Grover 
Cleveland  was  the  Democratic  candidate  in  1888,  the  year 
of  his  defeat;  Reid  was  the  Republican  candidate  for  Vice- 
President  in  the  campaign  of  1892,  when  Cleveland  and 
Stevenson  were  elected;  and  Judge  Alton  B.  Parker  was 
the  Democratic  candidate  for  President  in  1904. 

The  holding  of  important  places  in  the  Federal  Govern- 
ment by  New  Yorkers  is  but  the  superficial  evidence  of  the 
State's  share  in  national  affairs,  the  inevitable  result  of  the 


t^/Kl£3>y 


WILLIAM    COLLINS   WHITNEY 

Publicist   and    financier;   born   in   Conway,    Mass.,   July    15, 
1841.     His  father,  James  S.  Whitney,  was  a1  one  tirn 
of  the  Port  of  Boston  and  in  [860  a  delegate  to  the  Chari 
Convention.     William    ('.    Whitney    was   gr;  a1    Yale   in 

1863  and  Harvard  Law  School  1865;  continued  the  study  of  law 
in  New  York  City.     Took  active  part  in  politics  as  a  Democrat 
and  was  a  supporter  of  Mr.  Tilden  in  his  movement  against  the 
1    ring.     Was    appointe  unsel    of    New 

York  City  in. 1 875,  1  > 7 < > ,  and   1880.      Was  made  Secretary  of  the 
Navy  l>y  Presi  eland  on  March  5,  id  laid  the 

found  the  modem   American  nav;  d  actively 

upon  large  financial  enterprises  after  retiring  from  public  life, 
having  much  to  do  with  the  consolidation  of  the  tra 
tern  in  New  York  and  being  a  director  in  the  Morton  Tru 
and  other  banks  and  companies.     Was  largely  instrumental  in 
securing  the  nomination  of  Mr.  Cleveland  for  President  in  1*02, 
but  declined  further  public  office.     Died  February  2,  1904. 


INFLUENCE  OF  NEW  YORK  IN  NATIONAL  AFFAIRS    55 

imperial  greatness  and  resources  of  the  State  itself,  and  of 
the  fact  that  its  metropolis  is  at  the  gateway  of  commerce 
and  is  the  center  of  exchanges. 

The  great  names  in  the  public  affairs  of  the  country 
have  been  associated  with  the  Department  of  State.  Under 
the  Confederation,  John  Jay,  of  New  York,  was  Secretary 
of  Foreign  Affairs  and,  at  the  request  of  Washington, 
continued  at  the  head  of  the  Department  of  State  until 
Jefferson  arrived  in  New  York;  during  the  Virginia  regency, 
Jefferson,  John  Marshall,  Madison,  and  Monroe;  in  the 
middle  period  of  the  nineteenth  century,  John  Quincy 
Adams,  Henry  Clay,  Daniel  Webster,  John  C.  Calhoun, 
William  L.  Marcy,  James  Buchanan,  Edward  Everett,  and 
Lewis  Cass;  in  the  later  period,  Seward,  Fish,  and  Evarts, 
all  three  of  New  York. 

During  several  of  the  most  critical  periods  of  the  nation's 
history,  its  foreign  policy  was  directed  by  men  of  New  York, 
through  the  Department  of  State:  by  Van  Buren  for  two 
important  years  ending  in  183 1;  William  L.  Marcy  was 
Secretary  of  State  during  the  whole  of  the  administration 
of  Pierce,  from  1853  to  1857;  William  H.  Seward  during  the 
Civil  War  and  Reconstruction,  from  1861  to  1869;  Hamilton 
Fish  for  nearly  two  terms  of  President  Grant,  and  William 
M.  Evarts  succeeded  him  under  the  administration  of 
President  Hayes.  There  was  then  a  gap  of  twenty-four 
years  in  the  supremacy  of  New  York  in  the  Department  of 
State,  during  which,  however,  its  representatives  sat  in  the 
presidential  and  vice-presidential  chair;  but  upon  the  death 
of  Secretary  Hay  in  the  summer  of  1905,  Elihu  Root,  of 
New  York,  succeeded  him  in  the  Department  of  State. 

Without  reference  to  the  more  recent  instances,  men  of 
New  York  have  been  given  other  important  Cabinet  positions 
in  recognition  of  the  State's  influence  in  national  affairs. 
The  most  important  creative  force  in  the  Treasury  Depart- 


56  PROGRESS  OF  THE  EMPIRE  STATE 

ment  was  Alexander  Hamilton,  who  first  held  the  office  of 
Secretary  of  the  Treasury.  Other  men  of  New  York  who 
occupied  that  position  were  John  C.  Spencer  (1843-44); 
John  A.  Dix,  for  a  brief  time  in  1861;  Charles  J.  Folger, 
under  President  Arthur;  Daniel  Manning  and  Charles  S. 
Fairchild,  under  Cleveland's  administration,  from  1885  to 
1889. 

John  Armstrong  (1813-18),  Peter  B.  Porter  (1828-29), 
John  C.  Spencer  (1841-43),  William  L.  Marcy  (1845-49), 
Daniel  S.  Lamont  (1894-97),  and  more  recently  Elihu 
Root  and  Henry  L.  Stimson  have  been  Secretaries  of  War. 

The  New  Yorkers  who  have  been  Secretaries  of  the 
Navy  are  Smith  Thompson,  James  K.  Paulding,  William  C. 
Whitney,  and  Benjamin  F.  Tracy. 

Francis  Granger,  Thomas  L.  James,  Nathan  K.  Hall, 
Wilson  S.  Bissell,  and  George  B.  Cortelyou,  have  been 
Postmasters-General. 

Benjamin  F.  Butler,  Edwards  Pierrepont,  William  M. 
Evarts,  and  George  Wickersham,  have  held  the  position  of 
Attorney-General.  Cornelius  N.  Bliss  and  Oscar  Straus  are 
other  New  Yorkers  who  have  held  Cabinet  places. 

New  York  is  described  as  the  financial  and  commercial 
center  of  the  country,  and  the  great  States  of  the  Middle 
West,  Ohio,  Illinois,  and  Indiana,  are  regarded  as  constituting 
its  political  center.  But  New  York's  tendency  to  conserva- 
tism is  not  to  be  regarded  as  mere  commercialism.  While 
Alexander  Hamilton  remains  the  personification  of  New 
York's  constructive  conservatism  in  finance,  its  adherence  to 
American  political  ideals  finds  expression  in  the  popular  ma- 
jorities so  often  given  in  support  of  the  party  of  Jefferson, 
ever  broadening  the  basis  of  suffrage.  New  York's  ideals 
have  often  prevailed  over  financial  or  commercial  interests. 
If  viewed  without  regard  to  party  considerations,  perhaps 
the  most  significant  and  conclusive  vindication  against  the 


INFLUENCE  OF  NEW  YORK  IN  NATIONAL  AFFAIRS     57 

charge  of  being  controlled  by  such  interests,  in  its  relation 
to  national  affairs,  was  the  attitude  of  the  State  at  the 
time  of  the  Civil  War.  Far-reaching  as  were  the  interests 
of  New  York  in  the  Southern  States,  great  as  was  its  sym- 
pathy with  the  people  of  those  States  during  the  heart- 
rending tragedies  of  civil  war,  no  State  poured  out  blood 
and  treasure  more  freely  in  the  defense  of  the  Union. 

The  first  steps  to  strengthen  the  credit  of  the  government 
were  taken  by  men  representing  the  financial  interests  of 
New  York.  Had  their  advice  been  followed,  specie  pay- 
ments might  never  have  been  suspended,  public  credit  would 
have  remained  comparatively  unimpaired,  and  the  long 
period  of  stagnation  and  depression,  beginning  with  the 
panic  of  1873,  would  have  been  mitigated,  if  not  entirely 
avoided. 

Unerring  devotion  to  sound  financial  policies  has  been 
the  distinguishing  trait  of  the  majority  of  the  people  of 
New  York.  This  was  to  be  expected  of  a  State  which 
approved  and  upheld  the  constructive  work  of  Hamilton 
and  supported  Marcy  and  Seward  in  their  policy  and 
measures  for  the  extension  of  national  commerce.  Men  of 
all  political  parties  in  New  York,  having  the  advantage  of 
being  at  the  center  of  exchanges,  and  therefore  enabled 
more  easily  than  those  farther  removed  from  it  to  appreciate 
any  dangers  that  might  threaten  the  national  credit,  have 
at  times  overruled  those  less  informed  and  more  impatient 
in  seeking  remedies  for  recognized  evils.  On  those  occasions 
of  which  the  firm  and,  at  times,  unpopular  adherence  of 
President  Cleveland  to  the  gold  standard  is  a  conspicuous 
instance,  the  voice  of  New  York  has  expressed  the  maturer 
judgment  of  the  American  people. 

In  the  two  great  political  parties  the  leaders  from  New- 
York  are  often  a  controlling  force  in  questions  other  than 
those  affecting  national  finances  or  commerce.     Though  the 


58  PROGRESS  OF  THE  EMPIRE  STATE 

city  of  New  York  is  the  financial  and  commercial  center 
of  the  country,  and  while  the  States  of  the  Middle  West 
may  be  considered  its  field  of  greatest  political  activity  in  a 
national  sense,  and  the  Southern  States  remain  the  great 
nursery  of  national  statesmen,  the  seat  of  the  Federal 
Government  is  at  the  national  capital,  Washington.  There 
the  vast  organism  of  all  the  departments  of  the  government 
is  centered.  There  is  concentrated  the  executive  power, 
which  is  constantly  expanding  with  the  growth  and  develop- 
ment of  the  country,  and  the  inevitable  and  continual 
extension  of  the  authority  of  all  branches  of  the  Federal 
Government  has  had  the  effect  of  centering  in  the  national 
capital  the  political  interests  of  the  country.  The  ever- 
improving  facilities  of  intercommunication  between  Wash- 
ington and  the  metropolis  have  brought  about  the  closer 
relations  of  neighborhood  and  increased  the  political  in- 
fluence of  one  upon  the  other.  New  and  greater  oppor- 
tunities for  influencing  national  affairs  have  brought  about 
corresponding  responsibilities  to  the  City  and  the  State  of 
New  York.  It  may  be  confidently  expected  that  the  tradi- 
tional patriotism  of  the  people  of  New  York  will  require 
them  to  view  questions  of  national  policy  from  the  stand- 
point of  national  rather  than  of  local  interests,  and  that 
the  closer  association  with  the  national  capital  will  result 
in  promoting  the  welfare  of  our  country. 


e/^J^  a^. 


£r~n~ 


CHARLES  ARTHUR  CONANT 

Financial  specialist;  horn  Winchester,  Mass.,  July  2,  1861 ;  grad- 
.)  High  School,  1879.     Was 
newspaper  work  f<  >r  al  iou1  twenty  years,  beginning  at  Boston,  1880. 
Associated  with  Executive  Committee  of  Indianapolis  Monetary 
Convention,  icSyy,  and  sugge:  al  provisions  of  the  Gold 

Standard  Law  of  March  14,  1900.  Appointed  by  Secretary 
Root  Special  Commissioner  to  the  Philippine  Islands  in  summer 
of  1 90 1,  for  the  purpose  of  investigating  coinage  and  banking 
conditions  there,  his  report  being  the  basis  for  the  Coinage  Act  of 
1903,  from  which  the  new  coins  became  popularly  known  as 
"Conants."  Visited  Mexico  in  1903,  on  invitation  of  Mexican 
Government  to  confer  with  a  commission  regarding  reform  of 
Mexican  currency.  Appointed  1906  on  special  commission  of 
the  New  York  Chamber  of  Commerce  on  Reform  of  the  Currency, 
whose  report  was  adopted  by  the  Chamber,  November  1,  1906, 
and  was  among  the  first  formal  indorsements  in  America  of  a 
central  bank  of  issue  Was  in  1 910  and  19 12  delegate  of  United 
States  to  International  Conference  at  The  Hague  on  Bills  of 
inge.  Author  of  A  History  of  Modem  Banks  of  Issue. 
and  The  Principles  of  Money  and  Banking.  Director  National 
Bank  of  Nicaragua,  Manila  Railway,  and  Credit  Clearing  House 
W  York;  member  Chamber  of  Commerce  of  State  of  New 
York,  American  Asiatic  Association,  Socidte'  d'Economie  de 
France. 


CHAPTER  III 
THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK 

BY  CHARLES  A.   CONANT 

THE  history  of  New  York  is  in  a  large  sense  an 
epitome  of  the  history  of  the  country.  This  is 
preeminently  true  in  the  field  of  finance.  In  certain 
manufactures,  in  agriculture,  and  in  some  other  fields,  the 
primacy  of  the  Empire  State  may  be  contested  by  sister 
States,  but  as  the  center  of  financial  operations  there  is  none 
in  America  to  dispute  the  supremacy  of  the  State  of  New 
York,  and  her  chief  city. 

This  supremacy,  however,  was  not  undisputed  in  the 
early  days  of  the  Republic.  On  the  contrary,  Philadelphia 
was  an  important  center,  partly  because  it  was  the  seat  of 
the  Continental  Congress  and  the  Federal  Government, 
partly  from  the  existence  there  of  large  fortunes  and  enter- 
prising financiers.  Robert  Morris,  who  was  the  financial 
bulwark  of  the  Revolution,  was  a  Philadelphian  and  carried 
on  important  enterprises  in  Philadelphia  after  the  peace. 
The  first  incorporated  bank  under  the  Confederation,  the 
Bank  of  North  America,  was  founded  in  Philadelphia  in 
1781.  It  seemed  natural  that  the  Bank  of  the  United 
States — both  under  the  first  charter  and  under  the  later 
one,  which  Jackson  overthrew — should  have  its  head  office 
at  Philadelphia.  The  name  of  Nicholas  Biddle,  the  presi- 
dent of  the  bank,  ranked  in  his  time  with  that  of  the  modern 
captain  of  finance.      Stephen  Girard — closing  up  a  slow 

59 


60  PROGRESS  OF  THE  EMPIRE  STATE 

account  with  the  Barings  by  taking  their  stock  in  the  United 
States  Bank  and  then  buying  out  the  assets  of  the  in- 
stitution in  full  and  making  it  the  basis  of  a  new  and  stronger 
bank — was  a  prototype  of  the  powerful  financier  of  to-day, 
who  infuses  new  capital  into  a  decadent  enterprise  and 
makes  it  again  a  power  in  the  world  of  business. 

Evidence  of  the  predominance  of  Philadelphia,  even  in 
the  field  of  speculation,  is  afforded  by  the  promptness  with 
which  news  from  abroad  was  transmitted  to  the  Quaker 
City  as  soon  as  it  reached  New  York.  Thus,  Gouge  relates 
how  on  April  9,  1825,  seven  expresses  arrived  at  Phila- 
delphia with  news  of  a  great  rise  of  prices  in  the  markets  of 
Liverpool  and  London.  "  The  effect  was  electric.  Twenty- 
seven  cents  were  offered  for  Upland  cotton,  and  refused, 
though  the  holders  would,  a  week  before,  have  been  happy 
to  obtain  20  cents."1  New  York,  however,  bore  her  full 
part  in  the  bank  mania,  which  broke  out  at  about  the  same 
time.     According  to  the  author  just  quoted : 

"The  infatuation,  if  we  may  be  permitted  to  call  it  by 
so  mild  a  name,  was  most  violent  in  New  York.  The  specu- 
lators of  that  city,  not  content  with  such  privileges  as  their 
own  Legislature  could  bestow,  prevailed,  by  means  of  bo- 
nuses, on  the  Legislature  of  New  Jersey  to  establish  a  string 
of  small  moneyed  corporations  along  the  shore  of  the  North 
River;  and,  in  defiance  of  the  statutes  of  Pennsylvania,  took 
possession  of  coal  lands  within  her  limits,  under  the  color 
of  charters  granted  by  another  State.  Their  own  Legis- 
lature they  besieged  in  every  possible  form.  During  the 
session  which  commenced  in  January,  1825,  application  was 
made  for  charters  for  new  Banking,  Insurance,  and  other 
companies,  with  nominal  capitals  of  the  amount  of  fifty-two 
million  dollars. 

"Money  was  never  more  abundant,  if  a  judgment  could 

'Gouge,  Paper  Money  and  Banking,  p.  180. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK       61 

be  formed  from  subscriptions  to  the  stock,  of  such  companies 
as  succeeded  in  their  applications  for  charters.  Three 
million  dollars  were  subscribed  in  one  day,  in  January,  to 
the  stock  of  the  New  Jersey  Lombard  and  Protection  Com- 
pany, though  its  capital,  as  fixed  by  law,  was  only  three 
hundred  thousand  dollars.  Nine  million  dollars  were  sub- 
scribed in  April  to  the  New  York  Water  Works  Company, 
and  by  some  contrivance  its  script  was  raised  in  the  market 
to  thirty  per  cent,  above  par.  Thirteen  millions  were  sub- 
scribed in  May  to  the  stock  of  the  Delaware  and  Raritan 
Canal  Company.  Between  the  5th  and  the  16th  of  Febru- 
ary, the  stock  of  the  New  York  Gas  Company  advanced 
28  per  cent.,  and  was  sold  at  178." 

It  was  just  about  this  time  (1825)  that  the  coming  pre- 
eminence of  New  York  began  to  be  recognized.  Fulton  had 
made  an  important  contribution  to  the  future  of  his  city  by 
the  application  of  steam  to  water  transportation  on  the 
Hudson  in  1807.  It  was  the  harbinger  of  tendencies  in 
transportation  which  were  to  give  commercial  supremacy  to 
a  seaboard  city  with  a  well-protected  harbor  and  a  deep- 
water  channel.  At  the  moment,  however,  it  was  another 
event  relating  to  water  transportation  which  seemed  to  turn 
the  scale  in  favor  of  the  future  metropolis.  This  was 
the  opening  of  the  Erie  Canal  in  1825.  The  commerce  of  the 
lakes  was  thus  brought  to  New  York,  which  became  the 
natural  center  of  the  export  trade  in  the  growing  products 
of  the  West.  Then,  when  the  railway  era  began,  after 
1830,  the  chief  lines  centered  in  New  York.  It  needed  only 
the  quarrel  between  Jackson  and  the  Bank  of  the  United 
States,  the  removal  of  the  public  deposits  from  the  bank  and 
the  lapse  of  its  charter,  to  take  away  the  crown  of  financial 
leadership  from  Philadelphia  and  fasten  it  firmly  upon  the 
brow  of  the  chief  city  of  the  Empire  State. 

To  deal  intelligently  with  all  the  elements  of  the  financial 


62  PROGRESS  OF  THE  EMPIRE  STATE 

development  of  New  York  within  the  limited  space  of  a 
single  chapter  is  a  task  of  difficulty.  From  a  narrative 
point  of  view  it  might  be  approached  in  three  ways — 
chronologically,  topically,  or  from  the  side  of  personal 
leadership.  Chronologically,  the  evolution  of  New  York 
finance  would  represent  a  long  procession  of  great  trans- 
actions, some  interwoven  with  the  political  progress  of  the 
nation  and  nearly  all  the  others  with  its  economic  progress. 
But  such  a  narrative,  if  complete,  would  almost  overwhelm 
the  reader  with  its  mass  of  details,  some  of  which,  impor- 
tant in  their  day,  have  been  overshadowed  by  greater  events 
in  later  times. 

From  the  topical  point  of  view  it  would  perhaps  be 
possible  to  single  out  those  events  which  have  been  most 
conspicuous  and  which  have  borne  most  directly  on  the  de- 
velopment of  the  New  York  money  market  as  it  is  to-day — 
typical  cases  of  stock  market  speculation;  the  development 
of  railway  finance,  with  its  #16,000,000,000  of  capital;  the 
evolution  of  the  traction  system  of  the  country,  which  now 
absorbs  more  than  #3,000,000,000  of  capital;  or  the  relations 
of  the  New  York  market  with  the  Government — both  in 
periods  of  national  stress  when  Wall  Street  came  to  the  rescue 
of  the  country,  and  in  periods  of  monetary  stress  when  the 
Government  reciprocated  by  coming  to  the  aid  of  Wall 
Street  with  its  surplus  funds. 

From  the  standpoint  of  great  personalities  might  be 
woven  perhaps  a  story  more  romantic  than  the  measured 
narrative  of  economic  tendencies.  The  figures  of  Jacob 
Little,  John  Jacob  Astor,  Daniel  Drew,  Jay  Gould,  Commo- 
dore Vanderbilt,  and  Jay  Cooke  have  become  the  centers  of 
legends  as  romantic  in  the  field  of  finance  as  those  of  the 
great  figures  of  chivalry  in  the  storied  days  of  knighthood. 
In  dealing  with  these  great  names,  moreover,  as  well  as  with 
the  more  modern  group,  like  Villard,  Morgan,  Ryan,  Still- 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK       63 

man,  Baker,  Schiff,  and  Harriman,  it  would  be  necessary 
to  recognize  wide  differences  not  in  personal  character  only, 
but  in  the  character  of  the  work  performed — in  some  cases 
the  constructive  work  of  building  up  the  railway  and  in- 
dustrial structure  of  the  country,  in  others  the  application  of 
profound  insight  and  great  ability  to  the  more  delicate 
fluctuations  of  values  on  the  Stock  Exchange. 

In  dealing  with  a  series  of  problems  so  vast,  the  topical 
method  will  be  that  chiefly  pursued  in  this  chapter,  but  the 
narrative  will  be  illustrated  by  reference  to  those  prominent 
personalities  whose  names  cannot  well  be  severed  from 
the  achievements  of  which  they  were  a  part.  It  will  be 
necessary,  however,  while  taking  a  general  survey  of  many 
fields,  to  limit  the  scope  of  this  chapter  as  far  as  possible  to 
what  may  be  called  the  history  of  constructive  finance. 
Special  chapters  in  this  work  are  devoted  to  the  fluctuations 
of  values  and  great  events  on  the  Stock  Exchange;  the 
evolution  of  banking  in  New  York  as  a  distinctive  pro- 
fession; the  details  of  the  industrial  combinations  whose 
finances  are  now  chiefly  centered  in  New  York;  and  to  many 
other  subjects  which  in  some  of  their  aspects  fall  within  the 
field  of  finance. 

As  already  indicated,  the  financial  supremacy  of  New 
York  dates  essentially  from  the  opening  of  the  Erie  Canal 
in  1825  and  railway  construction  on  a  serious  scale.  The 
Mohawk  &  Hudson  River  Railroad  was  completed  in  1831 
and  was  the  first  railway  security  listed  on  the  New  York 
Stock  Exchange.  By  1840  the  aggregate  railway  equipment 
of  the  country  had  reached  3049.79  miles.  It  has  been  largely 
in  railway  securities  that  the  chief  storms  have  raged  in  the 
New  York  stock  market,  down  to  a  very  recent  date.  The 
panic  of  1837,  following  the  removal  of  the  public  deposits 
from  the  United  States  Bank,  found  New  York  still  sub- 
ordinate in  some  degree  to  Philadelphia,  or  at  least  not  yet 


64  PROGRESS  OF  THE  EMPIRE  STATE 

paramount.  The  crash  of  that  year  was  due  largely  to 
speculation  in  Western  lands  and  the  sudden  check  to  such 
inflation  by  the  policy  of  President  Jackson.  In  these 
particulars  the  crisis  did  not  directly  concern  New  York. 
The  financial  stringency  in  England,  however,  naturally  re- 
acted upon  the  New  York  market  and  the  banks  of  the 
city  were  compelled  to  suspend  specie  payments  on  May 
ioth. 

The  New  York  money  market  suffered,  in  common  with 
that  of  Philadelphia,  from  the  efforts  of  President  Biddle 
of  the  United  States  Bank  to  corner  cotton.  Biddle  drew 
bills  on  England  against  cotton  for  £3,000,000  and  expected 
to  get  the  benefit  of  the  difference  between  the  rates  at  which 
he  loaned  money  in  the  United  States — five  and  six  per 
cent. — and  the  English  rate  of  two  per  cent.  But  the 
United  States  Bank  no  longer  controlled  the  supply  of 
commercial  credit,  as  when  it  had  a  Federal  charter,  and 
the  fabulous  profits  which  Biddle  appeared  to  have  within 
his  grasp  stimulated  the  creation  of  local  banks  all  through 
the  cotton  belt,  which  made  advances  to  the  planters  and 
undertook  to  sell  cotton  on  their  own  account  in  Europe. 
The  rise  of  the  discount  rate  at  the  Bank  of  England  cut 
off  these  profits  and  compelled  the  Bank  of  the  United 
States  to  go  to  the  rescue  of  the  smaller  banks  in  order  to 
maintain  the  price  of  cotton.  The  task  was  too  great, 
even  for  Biddle's  resources.  Reserve  stocks  of  cotton  came 
upon  the  market,  stocks  in  the  hands  of  manufacturers  were 
allowed  to  run  down,  mills  reduced  their  output,  the  house 
of  Hottinguer  of  Paris  protested  Biddle's  paper,  the  Hopes 
of  Amsterdam  broke  off  relations  with  him,  and  the  price 
of  cotton  collapsed. 

All  these  incidents,  while  they  affected  keenly  the  market 
for  foreign  exchange  which  had  been  developed  in  New  York, 
still  bore  the  impress  of  Philadelphia  speculation;  but  the 


AUGUST  BELMONT 

Financier;  born  in  Alzey,  Hesse-Darmstadt,  in  [816;  was  edu- 
cated in  Frankfort  and  spent  several  years  in  the  employ  of  the 
Rothschilds  there  and  in  Naples.  Came  to  New  York  in  1 8^7  as 
the  Rothschild  agent.  Was  Austria  Consul-General  to 
York  from  ,H44  to  1850,  but  resigned  because  of  dissatisfaction  at 
the  treatment  accorded  by  Austria  to  Hungary.  Was  United 
States  Charge-  d  Affaires  at  The  Hague  in  ,853  and  became 
Minister  in  1854.  Resigning  in  ,858,  he  returned  to  the  United 
States  and  engaged  in  banking.  He  took  an  active  interest  in 
public  affairs,  was  a  delegate  to  the  Democratic  National  Con- 
vention of  i860,  and  from  that  year  until  ,872  chairman  of  the 
Democratic  National  Committee.  He  married  a  daughter  of 
Commodore  Matthew  C.  Perry,  for  whom  his  eldest  son  Perry 
was  named.  He  was  instrumental  in  erecting  a  bronze  statue  of 
Commodore  Perry  at  Newport,  and  was  an  active  patron  of  the 
arts  and  of  American  sports,  being  for  twenty  years  president  of 
the  Amencan  Jockey  Club.  Died  in  New  York  City,  November 
24t  1889. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK       65 

collapse  of  the  United  States  Bank,  after  several  vain  efforts 
to  restore  its  credit,  practically  decided  the  transfer  of 
financial  supremacy  to  the  chief  city  of  the  Empire  State. 

The  crisis  of  1857  found  New  York  occupying  this  posi- 
tion of  supremacy  without  dispute.  The  two  most  con- 
spicuous features  in  this  crisis  were  the  outpour  of  gold 
from  the  Californian  and  Australian  mines,  which  seemed 
for  the  moment  to  afford  the  prospect  of  perpetually  ex- 
panding prices,  and  the  frenzy  for  railway  construction. 
The  railway  mileage  built  in  the  United  States  in  1856  was 
3642  miles  and  construction  for  the  nine  years  ending  with 
1857  amounted  to  21,000  miles.  Although  these  figures 
seem  small  in  comparison  with  the  240,000  miles  of  the 
present  day,  they  represented  an  enormous  investment  for 
that  period.  In  England  only  about  8000  miles  had  been 
constructed  up  to  1857,  at  an  expense  of  #750,000,000. 
In  the  United  States  the  new  construction  of  nine  years 
absorbed  a  lesser  average  amount  per  mile,  because  of  lighter 
construction  and  lower  cost  of  roadbeds,  but  demanded  a 
total  of  #700,000,000  in  new  capital. 

Private  wealth  was  already  attaining  proportions  quite 
as  alarming,  no  doubt,  to  the  croakers  of  that  time  as  the 
somewhat  larger  accumulations  of  more  recent  times.  A 
list  published  by  the  Sun  in  1845,  of  property  owners 
whose  resources  were  valued  at  #100,000  or  more,  contained 
several  hundred  names,  many  of  which  foreshadow  the  lead- 
ing families  of  to-day.  John  Jacob  Astor  led  the  list  with  a 
fortune  put  at  #25,000,000  to  #50,000,000,  an  estimate  prob- 
ably much  too  high  for  that  time.  William  B.  Astor  was 
credited  with  #5,000,000;  the  Stephen  Van  Rensselaer 
estate,  #10,000,000;  Stephen  Whitney,  #10,000,000;  James 
Lenox,  #3,000,000;  Peter  B.  Stuyvesant,  #2,500,000;  Mrs. 
Jacob  Lorillard,  #1,500,000;  Gouverneur  Morris,  #1,500,000; 
and  others  who  were  allotted  #1,000,000  each  were:  Henry 


66  PROGRESS  OF  THE  EMPIRE  STATE 

Brevoort,  Jr.;  William  B.  Cosby,  Maltby  Gelston,  Harper 
and  Brothers,  Jonathan  Hunt,  Peter  Lorillard,  Jr.,  and 
Anson  G.  Phelps.  Commodore  Vanderbilt  was  at  that 
time  credited  with  only  #250,000,  but  within  a  short  time 
was  to  prove  his  ability  to  win  much  more. 

So  rapid  was  the  development  in  every  branch  of 
American  financial  progress  that,  in  the  language  of  Pro- 
fessor Von  Hoist,  "It  was  more  and  more  lost  sight  of, 
that  even  in  the  age  of  steam,  time  must  remain  an  essential 
factor  in  every  process  of  development."  Immigration 
lent  its  aid  to  the  natural  growth  of  population  and  the 
expansion  of  trade,  and  the  American  people,  under  these 
combined  influences,  to  quote  again  from  Von  Hoist, 
"worked  themselves  deeper  and  deeper  into  the  delusion  that 
the  fancy  could  scarcely  keep  pace  with  the  reality,  and  were 
thus  led  to  mold  the  reality  in  their  minds  in  accordance 
with  what  imagination  pictured  to  them."1 

The  blow  which  started  the  collapse  of  the  house  of 
cards  built  up  by  excessive  speculation  was  the  failure  of 
the  Ohio  Life  Insurance  &  Trust  Company  on  August  24, 
1857,  with  liabilities  reported  at  #7,000,000.  This  big  bank- 
ing and  investment  institution  did  a  large  business  in  New 
York  as  well  as  Cincinnati.  A  panic  followed  on  the  New 
York  Stock  Exchange,  stocks  fell  acutely  in  market  value, 
and  desperate  appeals  were  made  to  the  banks  for  aid. 
The  latter,  however,  with  specie  depleted  to  less  than  10 
per  cent,  of  loans,  had  already  reached  the  limit  of  expansion. 
The  loan  account  was  reduced  from  #122,077,252  on  August 
8th,  to  #97,245,826  on  October  17th,  and  four  days  before 
the  latter  date  the  New  York  banks,  with  specie  reduced 
below  #8,000,000,  suspended  specie  payments.  The  Phila- 
delphia banks  had  preceded  them  by  eighteen  days — on 
September  26th.     One  of  the  impelling  influences  of  the  sus- 

1  Von  Hoist,  Constitutional  History  of  the  United  States,  vi.,  p.  104. 


THE  FINANCIAL  DEVELOPMENT  OF  NI  \\    YORK       67 

pension  was  the  gradual  decline  of  deposits,  from  #67,372,941 
on  August  8th  to  #42,696,012  on  October  13th,  as  merchants, 
unable  to  obtain  their  usual  accommodations,  were  com- 
pelled to  draw  upon  their  reserve  funds.  Even  at  this 
early  date,  before  the  redeposit  system  of  the  national 
banking  law  had  been  thought  of,  attention  was  attracted 
by  the  withdrawal  from  New  York  of  ''country  deposits." 
A  writer  of  the  time  declares: 

"An  important  fact  must  be  stated  in  connection  with 
the  fall  of  deposits  .between  August  22d  and  September 
26th,  viz.,  that  of  the  #7,322,608,  full  three-fourths  was 
drawn  out  by  the  country  banks;  so  that  the  amount  with- 
drawn by  the  individual  dealers  was,  at  most,  not  above  two 
millions  of  dollars.  Thus,  the  consequences  of  holding  a 
treacherous  country  fund  on  interest,  and  treating  it  as  bank 
capital,  fell  ultimately  on  our  city  merchants.1 

So  serious  was  this  loss  that,  by  the  Clearing  House 
Committee  which  reported  on  the  panic,  it  was  attributed 
in  large  measure  to  the  telegraph,  which  "new  medium  of 
communication  filled  our  banks  with  imperative  orders  for 
the  immediate  return  of  their  deposits,  in  specie."  How 
vastly  this  little  instrument  was  to  extend  the  influence  of 
the  market  of  New  York,  by  putting  "a  girdle  round  the 
earth,"  escaped  for  the  moment  the  attention  of  these 
conservative  gentlemen,  but  is  indicated  in  a  measure  by 
the  modest  figures  with  which  they  then  dealt  compared 
with  the  great  transactions  of  to-day.  Loans  then  "  reached 
the  unprecedented  height  of  #122,000,000  on  the  eighth  day 
of  August, "  1857,  and  the  country  deposits  were  estimated 
at  about  #15,000,000.  On  September  14,  1912,  the  loans 
and  discounts  of  the  New  York  Clearing  House  banks  were 
#2,010,803,000  and  deposits  of  country  banks  were  probably 
not  less  than  #400,000,000;  but  under  the  national  banking 

1  Gibbons,  The  Banks  of  New  York,  p.  355. 


68  PROGRESS  OF  THE  EMPIRE  STATE 

law  cash  reserves  in  New  York  are  no  longer  permitted  to 
drop  to  10  per  cent.,  but  must  equal  25  per  cent,  of  all 
deposit  liabilities. 

The  beginning  of  the  Civil  War  found  New  York  the 
financial  center  of  the  Union,  with  the  Clearing  House  eight 
years  old,  and  a  large  and  active  stock  market  in  govern- 
ment and  railway  securities.  The  New  York  market  of 
that  time  differed,  however,  in  many  respects  from  the 
market  of  to-day.  It  was  isolated  from  the  markets  of 
Europe  by  the  lack  of  the  ocean  cable,  which  came  only  in 
1866.  The  principal  banks  were  State  banks.  They  were 
better  organized  in  New  York  than  in  almost  any  other 
State,  except  Ohio,  Indiana,  Louisiana,  and  New  England; 
but  they  did  not  have  the  legal  status  as  reserve  banks  for 
the  entire  country,  which  was  conferred  on  the  national 
banks  of  New  York  by  the  National  Banking  Act  of  1864. 
It  is  interesting  to  note  the  comment  of  an  observer  of  that 
time  in  regard  to  the  small  part  which  the  note  issues  of  the 
banks  played  in  the  fluctuations  of  the  market.  Gibbons 
declares: 

"The  Superintendent  of  State  Banking  in  his  report  for 
1857,  in  view  of  the  fact  that  the  New  York  City  bank  cur- 
rency was  contracted  but  a  million  and  a  half  during  the 
panic,  says  :  'This  would  seem  clearly  to  demonstrate,  that 
whatever  may  lead  to  a  suspension  of  specie  payments, 
the  currency  of  our  banks,  properly  secured,  is  not  an  ele- 
ment in  its  production.'  " 

It  was  in  i860,  seven  years  after  the  organization  of 
the  Clearing  House,  that  Clearing  House  certificates  were 
first  resorted  to  in  New  York  to  meet  the  scarcity  of  money 
and  the  reduction  of  bank  reserves.  A  Clearing  House 
certificate  is,  in  substance,  a  combination  of  the  cash  reserves 
of  all  the  banks,  in  order  that  the  institution  whose  reserves 
are  impaired  may  not  be  driven  to  the  wall  by  the  heavy  de- 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK      69 

mand  for  cash  to  make  their  Clearing  House  settlements. 
The  certificates  were  issued  by  a  committee,  upon  the  deposit 
of  approved  securities  by  the  banks  taking  out  certificates, 
and  were  employed  in  the  settlement  of  balances  of  the  banks 
at  the  Clearing  House.  This  enabled  banks  taking  out 
certificates  to  settle  their  obligations  without  drawing  upon 
their  cash.  The  first  issue  of  such  certificates  was  on 
November  23,  i860,  when  the  approach  of  war  compelled 
much  forced  liquidation.  The  certificates  then  issued, 
which  reached  a  maximum  outstanding  of  #6,860,000,  were 
all  canceled  by  March  9,  1861,  but  a  new  issue  was  made  on 
September  16,  1861,  which  reached  a  maximum  outstanding 
of  #21,960,000.  Final  cancellation  was  attained  on  April 
28,  1862.  Two  other  issues  were  made  during  the  war  and 
the  same  device  was  resorted  to  again  in  1873,  1884,  1890, 
1893,  and  1907. 

The  war  brought  radical  changes  in  the  New  York 
market  by  the  appearance  of  the  Government  as  a  large 
borrower  and  by  the  issue  of  paper  money,  which  led  to  the 
suspension  of  specie  payments.  The  flood  of  government 
obligations  which  was  poured  upon  the  market  naturally 
divided  the  speculative  interest  which  had  recently  centered 
in  railway  securities.  All  through  the  war,  however,  and 
during  the  period  of  reconstruction,  speculation  raged  furi- 
ously in  railway  shares,  stimulated  and  encouraged  by 
the  fluctuations  in  the  public  credit  and  the  resulting  in- 
fluence upon  the  popular  conception  of  values.  It  was  the 
period  of  Cornelius  Vanderbilt,  Daniel  Drew,  Jay  Gould,  and 
"Jim"  Fisk.  It  was  during  this  period  that  Drew  and 
Vanderbilt  executed  their  famous  corners  in  Harlem,  in 
Hudson  River,  and  in  Erie.  'The  Commodore,"  as  Vander- 
bilt was  familiarly  known,  was  seeking  to  develop  the  Hud- 
son River  property  when  he  found  it  assailed  by  a  large 
bear  element.     Immediately  taking  command  of  the  situa- 


70  PROGRESS  OF  THE   EMPIRE   STATE 

tion,  he  tricked  his  opponents  into  the  belief  that  his 
position  was  weak  and  induced  them  to  increase  their  out- 
put of  short  stock. ■  Getting  practically  all  the  real  stock 
in  existence  into  his  possession  and  accepting  contracts 
for  additional  amounts  from  the  short  interest,  he  soon 
had  the  market  absolutely  in  his  hands.  From  112  the 
stock  rose  in  a  few  days  to  180.  The  shorts,  unable  to  find 
stock  to  make  the  deliveries  which  they  had  contracted  for, 
begged  for  mercy,  and  the  stock  was  sold  back  to  them  at 
a  handsome  profit. 

Much  more  complicated  and  daring  were  the  operations 
of  Daniel  Drew,  Jay  Gould,  and  Fisk  in  Erie.  The  story 
of  their  use  of  the  Erie  is  worth  outlining,  if  only  to  illus- 
trate methods  which  in  the  financial  world  of  to-day  would 
no  longer  be  tolerated  or  possible.  In  July,  1868,  the  Erie 
Railway  became  the  personal  property  of  Fisk  and  Gould. 
The  board  of  directors  held  no  meetings;  the  executive 
committee  was  never  called  together.  The  Erie  offices 
were  moved  to  a  white  marble  "palace"  on  the  corner  of 
Eighth  Avenue  and  Twenty-third  Street,  which  was  fur- 
nished with  vulgar  ostentation,  contained  an  opera  house, 
and  was  connected  with  the  private  apartments  of  Fisk. 
Just  before  this  (in  1866)  Drew  had  operated  his  famous 
plan  of  loaning  money  to  the  Erie  on  the  security  of  stock 
and  convertible  bonds  and  converting  the  bonds  into  stock 
to  meet  his  short  contracts. 

It  was  the  acquisition  by  Commodore  Vanderbilt  in 
1867  of  the  New  York  Central  Railroad  which  brought  him 
into  conflict  with  Drew  and  Gould.  'The  Commodore" 
desired  to  acquire  Erie.  To  guard  against  the  trans- 
formation of  more  "convertible  bonds"  into  stock,  he 
employed  the  services  of  Frank  Work  to  obtain  from  Judge 
Barnard  an  injunction,  restraining  Drew  from  payment  of 

'Vide Clews,  Twenty-eight  Years  in  Wall  Street,  p.  108. 


.  .A  Brits 


JOHN  PIERPONT  MORGAN 

Ban1  mius 

Speni  i  nt  in 

paternal  line  of  Captain  Miles  Morgan,  a  n 
came,  via  Bristol,   EngL  i   in    1637.     Gi 

English   High  School,  B( 

rsity  of  Gottingen.     Began  busin-  in  the 

hanking  house  of  Duncan  n&Co.;iii 

and  attorney  in    I  *  George  0.,  of 

London  (hi  1864,  juniorrm  m  of  Dab- 

ney,  Morgan  &  Co.,  and  ! 

he  eventually  became  head  under  the  name  of  J  .  1'.  Morgan 
The  house,  under  his  person;;!  .0,000 

!   Administration,  which 
ates  from  a  silver  i 
many  of  tl 

1     United    States 

1.00,000,000. 
His  b  '  equipping 

50,000 

o  the 
New  York  Trade  Schools;  and  $500,000  toward  the  b 
the  Cathedral  of  St.  John  the  Divine.     Died  at  Rome,  Italy, 
March  31,  1913. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK      71 

interest  on  #3,500,000  in  bonds,  pending  an  investigation  of 
his  accounts  as  treasurer  of  the  railway.  But  Drew  was 
equal  to  the  emergency.  Under  a  statute  authorizing  any 
railroad  to  create  and  issue  its  own  stock  in  exchange  for 
that  of  a  leased  line,  he  and  his  associates  issued  against  an 
insignificant  property,  worth  perhaps  #250,000,  the  amount 
of  #2,000,000  in  Erie  stock.  Deals  and  counter-deals,  and 
injunctions  to  restrain  injunctions,  did  not  prevent  Fisk 
from  seizing  the  enjoined  stock  certificates  by  force  nor 
Drew  from  throwing  50,000  shares  on  the  market  and  break- 
ing Vanderbilt's  attempted  "corner."  While  new  stock 
was  thus  being  put  out,  Fisk  is  said  to  have  summed  up  the 
purposes  of  his  clique  towards  Vanderbilt  in  the  remark, 
"If  this  printing  press  don't  break  down,  I  '11  be  d — d  if  I 
don't  give  the  old  hog  all  he  wants  of  Erie."  Vanderbilt 
was  credited  with  spending  #7,000,000  and  it  was  the  wonder 
of  his  friends  that  he  was  not  ruined.  It  is  not  surprising 
that  such  manipulations  did  their  share  in  unsettling  legiti- 
mate business  and  adding  to  the  severity  of  the  panic  of  1873. 
The  panic  was  the  natural  result  of  the  destruction  of 
capital  which  took  place  in  the  previous  decade  and  of  the 
encouragement  given  to  speculation  by  a  fluctuating  paper 
currency.  The  money  markets  of  the  world  had  to  reckon 
not  only  with  the  enormous  destruction  of  property  in  war 
in  the  United  States,  but  with  the  similar  fruits  of  two  other 
recent  wars — that  between  Germany  and  Austria  in  1866, 
which  was  crowned  by  the  victory  of  Germany  at  Sadowa, 
and  the  great  war  between  France  and  Germany,  for  which 
France  was  compelled  to  pay  to  Germany  an  indemnity  of  a 
thousand  millions  of  dollars.  The  direct  cost  of  the  Ameri- 
can war,  exclusive  of  pensions,  has  been  estimated  at  more 
than  #5,500,000,000,  and  the  cost  of  the  Franco-Prussian 
War  at  #2,700,000,000.  An  enormous  amount  of  capital 
also  was  absorbed  in  the  ten  years  prior    to  1873    in  the 


V 


PROGRESS  OF  THE   EMPIRE   STATE 


building  of  railways.  New  construction  in  the  United 
States  in  1870  was  5690  miles;  in  1871,  7670  miles;  in  1872, 
6167  miles;  and  in  1873,  including  a  part  of  the  period  of 
panic,  3948  miles.  In  Russia  a  system  of  12,000  miles  of 
railway  had  been  almost  entirely  created  since  1868  and 
in  South  America  nearly  #200,000,000  in  English  capital 
had  been  borrowed,  mostly  for  railway  enterprises.  It  was 
at  about  this  period  also  that  the  substitution  began  of 
Bessemer  steel  for  iron  as  the  material  for  rails. 

The  severity  of  the  panic  in  the  United  States,  as  well  as 
in  Austria,  was  heightened  by  the  state  of  the  currency. 
There  had  been  up  to  the  climax  of  the  Civil  War  an  almost 
uninterrupted  decline  in  the  value  of  the  paper  money  issued 
by  the  American  Government  and  a  corresponding  rise  in 
paper  prices.  With  the  close  of  the  war,  these  movements 
were  reversed.  There  started  in  a  rise  in  the  value  of  the 
currency  and  a  decline  in  prices.  This  decline  in  prices  spelt 
ruin  to  many  who  had  bought  real  estate  or  merchandise  in 
the  expectation  of  its  rise  in  value  and  imposed  paralysis 
even  upon  the  more  conservative,  who  had  correctly  read 
the  downward  tendency  of  values  expressed  in  paper  money. 

The  specific  cause  usually  assigned  for  the  panic  of 
1873  was  tne  failure  of  the  great  house  of  Jay  Cooke  & 
Company,  as  the  result  of  tying  up  its  resources  in  the 
Northern  Pacific  Railway.  The  incident  was,  however, 
only  typical  of  the  times,  and  if  Cooke  had  never  lived  the 
story  would  have  differed  chiefly  by  the  substitution  of  an- 
other name  for  his.  The  House  of  Jay  Cooke  &  Company 
had  grown  to  power  and  prestige  by  the  clever  and  original 
methods  employed  by  Mr.  Cooke  in  borrowing  money  for 
the  Government  during  the  Civil  War.  Cooke  was  a  true 
child  of  the  new  America — the  first  or  nearly  the  first 
baby  boy  born,  as  he  was  fond  of  boasting,  in  Sandusky, 
Ohio.     Through  political  and  social  connections,  he  entered 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK      73 

a  Philadelphia  banking  house  during  the  period  of  hazardous 
financing  and  State  banking  before  the  Civil  War,  and  had 
made  enough  by  1859,  while  still  under  forty  years  of  age, 
to  contemplate  retiring  from  active  business.  But  his  was 
not  a  nature  for  inactivity.  The  close  relations  established 
by  his  father  and  brother  with  Salmon  P.  Chase,  the  new 
Secretary  of  the  Treasury,  obtained  Cooke  a  hearing  in  the 
floating  of  the  early  war  loans.  He  quickly  realized  that  if 
the  Government  was  to  obtain  the  money  necessary  to  carry 
on  the  war,  it  must  be  by  educating  the  people  to  the  value 
of  the  war  bonds  and  the  necessity  of  taking  them  as  a 
patriotic  duty. 

It  was  a  wonderful  campaign  of  advertisement,  of  can- 
vassing the  post-offices,  of  manipulating  the  press,  and  of 
removing  opposition,  which  Cooke  carried  on  in  floating  hun- 
dreds of  millions  of  the  five-twenties,  the  ten-forties,  and  the 
seven-thirties.  The  later  flotations,  however,  which  came 
after  the  war,  required  perhaps  as  much  skill  as  the  earlier 
ones,  because  they  involved  persuading  the  people  to  retain 
their  public  funds  while  accepting  considerable  reductions  of 
interest.  Inevitably  Cooke's  success  drew  competitors  into 
the  field.  When  the  question  of  refunding  arose,  a  com- 
mittee representing  other  New  York  banking  houses  ap- 
peared in  Washington  to  demand  a  share  in  the  operation. 
The  composition  of  this  committee  is  of  interest  because  it 
was  practically  the  first  appearance  on  the  stage  of  public 
finance  of  J.  Pierpont  Morgan,  then  a  young  man  of 
thirty-five.  He,  with  Governor  Levi  P.  Morton,  who  had 
established  the  banking  house  of  Morton,  Bliss  &  Company, 
and  had  enlisted  the  aid  of  the  Rothschilds,  appeared  in 
Washington  in  January,  1873,  and  demanded  and  obtained 
from  Secretary  Boutwell  a  share  in  the  new  issues.  The 
methods  of  the  syndicate  had  little  of  the  "go"  of  the  old 
Cooke  methods  and  already J:he  tightening  of  the  money 


74  PROGRESS  OF  THE   EMPIRE   STATE 

market  was  making  itself  felt.  Where  subscriptions  of 
#600,000,000  had  been  expected  for  the  new  loan,  they 
amounted  after  several  weeks  to  less  than  #50,000,000,  and 
the  entire  operation  was  ultimately  suspended  by  the  out- 
break of  the  panic. 

The  lack  of  money  to  subscribe  for  the  government  loan 
was  a  warning  of  conditions  prevailing  in  the  money  market 
generally.  Jay  Cooke,  swept  along  by  the  great  success  of 
his  methods  in  disposing  of  the  war  loans,  believed  it  possible 
to  perform  the  same  miracle  with  the  bonds  of  the  Northern 
Pacific.  It  was  his  calculation  that  he  could  sell  bonds  as 
fast  as  he  was  called  upon  for  money  for  the  work  of  con- 
struction, and  it  was  distinctly  provided  in  the  contract 
with  the  road  that  the  advance  in  excess  of  bonds  sold 
should  never  exceed  #500,000,  which  itself  \vas  secured 
by  the  deposit  of  the  company's  bonds  at  50  cents  on  the 
dollar. 

During  the  summer  of  1872,  however,.with  the  presiden- 
tial campaign  at  its  height,  sales  of  bonds  fell  to  a  few  hun- 
dred thousand  dollars  a  month,  while  the  drafts  of  the 
treasurer  of  the  railway  company  were  running  at  about 
#1,000,000  per  month.  Inevitably  the  balance  of  floating 
indebtedness  by  the  railroad  to  the  banking  house  began 
creeping  up,  until  it  stood  near  the  close  of  August  at 
#1,583,000.  Ex-Secretary  McCulloch,  who  had  become  head 
of  a  London  branch,  and  other  associates  of  Cooke,  were  quick 
to  realize  that  the  house  was  getting  into  deep  water  and 
that  further  uncovered  advances  must  be  stopped.  It  was 
much  easier  to  lay  down  this  rule,  however,  than  to  carry 
it  out.  Already  there  were  complaints  along  the  line  of 
construction  that  wages  were  not  being  paid  promptly  and 
that  men  were  being  laid  off.  Smaller  railway  enterprises 
in  hands  less  strong  were  going  to  the  wall  from  similar 
causes,  and  in  October,  1872,  the  coupons  were  defaulted  on 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK     75 

the  St.  Paul  &  Pacific  road,  in  which  a  controlling  interest 
was  owned  by  the  Northern  Pacific. 

The  year  1873  was  thick  with  omens  of  disaster  for  the 
new  railway  enterprises.  The  Boston  fire,  in  November, 
1872,  while  not  so  disastrous  as  that  in  Chicago  the  year 
before,  caused  another  crash  in  the  stock  market.  Grave 
frauds  were  disclosed  in  the  management  of  the  Erie  Rail- 
road; General  John  C.  Fremont  failed  conspicuously  in  an 
effort  to  raise  money  for  the  Southern  Pacific  system  in 
France;  and  at  last  the  grave  exposures  broke  out  in  connec- 
tion with  the  Union  Pacific  Railroad  which  resulted  in  the 
Credit  Mobilier  investigation  and  its  long  train  of  scandals. 
A  traveler  in  Germany  wrote  home  in  August  that  an 
American  railway  bond,  "even  if  signed  by  an  angel  in 
heaven,  would  not  sell."  So  desperate  was  the  situation 
becoming  that  Henry  Cooke,  brother  of  Jay  Cooke,  put  his 
chief  dependence,  in  a  letter  to  his  brother,  on  "an  unfailing 
confidence  in  the  God  in  whom  we  put  our  trust."  "I  do 
not  believe, "  he  said,  "  He  will  desert  us. " 

But  the  Lord  did  not  intervene  to  prevent  the  results 
which  seemed  to  the  profane  an  inevitable  outcome  of 
economic  laws.  Jay  Gould  was  still  manipulating  a  power- 
ful gold  pool  in  the  late  summer  and  early  autumn,  when 
on  September  8th  the  first  rude  blow  was  given  to  the  card 
house  of  the  New  York  money  market.  The  New  York 
Warehouse  &  Security  Company  suspended,  followed  five 
days  later  by  a  firm  with  which  Daniel  Drew  was  associated. 
When  Mr.  Cooke  reached  his  Philadelphia  office  on  Sep- 
tember 1 8th,  he  found  a  dispatch  announcing  that  the  New 
York  office  had  been  closed  by  his  partners  in  that  city. 
The  news  spread  like  fire  on  one  of  the  Northern  Pacific's 
own  dry  prairies.  Other  houses  fell  the  same  day  or  the 
next  day,  stocks  dropped  from  twenty  to  forty  points,  money 
could  hardly  be  had  at  any  price,  and  the  Stock  Exchange 


76  PROGRESS  OF  THE   EMPIRE  STATE 

Committee  closed  the  Exchange,  in  the  language  of  the  vice- 
chairman,  "to  save  the  entire  Street  from  utter  ruin. " 

While  ultimately  the  assets  of  the  failed  house  proved 
to  be  amply  adequate  to  meet  its  liabilities,  the  career  of 
Mr.  Cooke  as  a  financier  was  ended.  Facing  cheerfully 
for  a  time  the  prospect  of  extreme  poverty,  his  fortune  was 
partially  recouped  six  years  after  the  panic  by  an  almost 
forgotten  mining  investment.  Repurchasing  his  old  home 
in  the  suburbs  of  Philadelphia,  he  lived  on  there,  content 
with  the  society  of  his  children  and  grandchildren,  his 
farming  and  fishing,  almost  forgotten  by  the  present  gen- 
eration of  Americans,  until  his  death  in  1905  at  the  age  of 
eighty-four.  In  his  great  cape  cloak  and  his  wide-brimmed 
light  gray  soft  felt,  set  over  a  gentle  face  adorned  by  a  long 
white  beard,  his  patriarchal  figure  was  long  familiar  on  the 
streets  of  Philadelphia  —  a  very  different  type  from  the 
shrewd,  grasping  men  who  speculated  in  their  country's 
fortunes  in  the  New  York  gold-room. 

The  disorder  and  discouragement  caused  by  the  panic 
did  not  make  easy  the  return  to  a  sound  monetary  system. 
The  corner  was  turned  at  last,  however,  with  the  re- 
sumption of  specie  payments  on  January  1,  1879.  Almost 
from  that  moment  prices  began  a  slow  recovery  and  wages 
began  to  advance.  The  advance  of  wages  now  had  more 
significance  than  during  the  war  time,  because  it  was  an 
advance  in  gold  wages  and  not  a  mere  advance  in  paper, 
which  only  partially  offset  the  decline  in  the  gold  value  of 
paper.  The  tendency  to  advance  in  prices,  however,  was 
concealed  to  a  large  degree  by  the  improvements  in  labor- 
saving  machinery,  which  greatly  increased  the  output  of  the 
average  laborer  and  the  single  machine. 

A  moderate  degree  of  prosperity  reigned  from  1879  to 
1890, — interrupted  only  slightly  by  the  failures  of  1884, 
which    carried    down    the    celebrated    house   of  Grant    & 


COLONEL  JOHN  JACOB  ASTOR 

Capitalist;  born  "Fcmcliff,"  Rhinebeck,  N.  V.,  July  13,  I 
son  of  William  and  Caroline  (Schermerhorn)  Astor,  and  grai 
of  William  B.  Astor:  educated  at  St.  Paul's  School,  Concord, 
N.  H.,  and  Harvard  University.  Principally  engaged  during 
mature  years  in  management  of  inherited  estate;  completed  that 
part  of  Waldorf-Astoria  Hotel  known  as  the  "Astoria,"  1897; 
compl  :  i  1  St.  Regis,  1905,  and  Hotel  Knickerbocker,  1906. 
oloncl  on  Governor  Morton's  staff;  commissioned  inspector- 
general,  with  rank  of  lieut.-col.,  U.  S.  V.,  May  15,  1898,  gave  a 
fully  equipped  battery  of  artillery'  to  the  Government  on  breaking 
out' of  war  with  Spam;  served  in  Cuba,  including  siege  and  sur- 
render of  Santiago  de  Cuba.  Inventor  of  pneumatic  machine 
to  remove  worn-out  material  from  roads  before  new  stone  is  laid 
down,  which  received  first  prize  at  World's  Columbian  Exposi- 
tion, 1893;  of  a  practical  turbine  engine,  and  of  other  practical 
mechanical  devices.  Author  of  A  Journey  in  Other  Worlds: 
A  Romance  of  the  Future.  Was  director  Astor  Trust  Co.,  Illinois 
ral  Railroad,  Mercantile  Trust  Co.,  National  Park  Bank, 
Plaza  Bank,  Niagara  Falls  Power  Co.,  Western  Union  Telegraph 
Co.,  etc.  Member  Chamber  of  Commerce,  New  York  Academy 
of  Sciences,  Society  Colonial  Wars,  Military  Order  of  Foreign 
Wars,  etc.  Went  down  on  the  Titanic,  after  putting  his  young 
wife  safely  aboard  a  life-boat,  April  15,  191 2. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK      77 

Ward.  The  years  following  the  silver  purchase  law  of 
1890  were  years  of  rapid  expansion,  until  the  panic  of  1893 
came,  with  its  demoralizing  check  to  nearly  every  branch  of 
activity.  The  history  of  that  crash  belongs  so  largely  to 
the  history  of  the  foolish  silver  legislation  of  1890,  which 
was  succeeded  in  1896  by  the  efforts  to  carry  the  country 
to  the  silver  basis,  that  most  of  the  details  may  properly  be 
left  to  the  competent  writer  of  the  chapter  on  the  relations 
between  the  New  York  money  market  and  the  Government. 
In  some  respects  the  crisis  of  1893  was  one  of  the  most 
severe  tests  to  which  the  financial  structure  of  New  York 
has  been  subjected,  because  the  stability  of  the  currency 
was  seriously  threatened.  The  Baring  crisis  in  London  in 
1890,  followed  by  the  breakdown  in  Australian  finance  in 
1893,  had  already  produced  their  reaction  upon  the  American 
market.  Early  in  1893  rates  for  money  stiffened,  American 
exports  of  merchandise  declined  by  #185,000,000,  loans  were 
called,  and  two  big  bank  failures  occurred  in  Chicago.  Up- 
on these  conditions  of  unstable  equilibrium  came  the  sus- 
pension of  silver  coinage  by  the  Government  of  British 
India.  Silver  declined  in  four  days  from  36d.  per  ounce  in 
London  to  30>^d.  on  June  30th,  and  grave  fears  arose  that 
the  Treasury  of  the  United  States  would  not  be  able  to  main- 
tain the  parity  of  the  silver  dollar.  Net  exports  of  gold  in 
the  three  years  ending  June  30,  1893,  were  #156,132,423,  and 
railway  net  earnings  fell  for  the  next  year  by  #147,000,000. 
On  July  26,  1893,  rates  for  call  money  rose  to  75  per  cent,  and 
the  break  in  prices  of  securities  was  so  violent  that  it  was 
again  proposed  to  close  the  Stock  Exchange,  as  in  1873. 
Failures  throughout  the  country  increased  from  10,270, 
with  liabilities  of  #108,500,000  in  the  calendar  year  1892  to 
15,560,  with  liabilities  of  #402,400,000  in  1893. r 

1  A  detailed  account  of  the  panic  of  1893  will  be  found  in  the  author's  History  of 
Modern  Banks  of  Issue,  fourth  edition,  G.  P.  Putnam's  Sons,  New  York,  pp.  668-697. 


78  PROGRESS  OF  THE   EMPIRE  STATE 

It  was  out  of  the  storm  and  wreckage  of  the  panic  of 
1893  that  modern  financial  New  York  emerged,  taught  by 
many  severe  lessons  how  to  guard  against  similar  disaster  in 
the  future.  It  was  necessary  to  wait  until  after  the  specter 
of  free  silver  was  laid  in  the  elections  of  1896  before  a  return 
of  confidence  could  even  be  expected.  Upon  that  event 
there  was  an  outburst  of  financial  and  industrial  activity, 
which  waxed  greater  from  year  to  year  until  1906.  The 
consolidation  of  railways,  the  merging  of  industrial  enter- 
prises, and  the  sudden  acquisition  of  large  amounts  of  free 
capital  by  the  men  who  surrendered  control  of  private  plants 
created  the  conditions  for  unfettered  industrial  expansion 
and  for  excessive  speculation  on  the  Stock  Exchange  which 
marked  the  history  of  the  years  from  1897  to  1906,  and 
ultimately  brought  on  the  panic  of  1907. 

The  city  of  New  York  prospered  greatly  with  the 
revival  of  industry  at  the  beginning  of  the  twentieth 
century,  because  she  had  become  the  center  upon  which 
converged  the  surplus  savings  of  a  prosperous  country. 
The  concentration  of  important  financial  operations  in 
New  York  is  a  natural  sequence  of  consolidation  in  many 
lines  of  industry  and  in  railway  and  banking  control. 
Among  the  special  influences  which  have  contributed  to  this 
concentration  are  the  rapid  growth  in  banking  resources  and 
security  issues,  the  large  assets  of  the  life  insurance  com- 
panies, the  accumulation  of  reserve  funds  by  railways  and 
industrial  companies,  and  the  rapid  increase  in  savings  de- 
posits. Through  these  instrumentalities  the  savings,  which 
the  people  of  the  entire  country  are  realizing  from  increased 
production  and  improved  trade,  are  poured  into  the  New 
York  money  market  almost  as  promptly  and  directly  as  a 
current  of  oil  through  one  of  the  Standard  Oil  Company's 
pipe-lines  or  a  stream  of  water  from  a  vast  storage  basin 
through  mammoth  supply  pipes.     The  control  of  these  vast 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK     79 

sums,  in  the  form  of  deposits  and  money  for  investment,  has 
placed  power  in  the  hands  of  the  men  at  the  head  of  New 
York  finance  such  as  has  seldom  been  possessed  by  the 
financiers  of  any  country. 

The  banking  resources  which  have  accumulated  in  New 
York  constitute  about  30  per  cent,  of  the  total  banking 
resources  of  the  United  States.  Among  the  national  banks, 
those  of  the  State  of  New  York  had  resources  in  June,  191 1, 
of  #2,383,294,277,  or  a  little  less  than  a  quarter  of  the  re- 
sources of  all  the  national  banks  of  the  country,  which  were 
#10,383,048,694.  Of  the  resources  of  loan  and  trust  com- 
panies, a  much  larger  proportion  is  concentrated  in  New 
York.  Of  such  companies  reporting  to  the  Comptroller  of 
the  Currency  in  191 1,  with  total  resources  of  #4,665,110,868, 
the  proportion  belonging  to  New  York  was  #1,711,599,061 ; 
while  of  State  banks  with  total  resources  of  #3,747,786,296, 
the  proportion  falling  to  New  York  was  #608,030,388. 

Evidence  of  the  large  share  of  New  York  in  the  wealth 
of  the  country  is  afforded  by  the  statistics  of  corporations 
domiciled  and  paying  the  corporation  tax  in  the  Empire 
State.  The  total  of  corporate  security  issues  in  the  United 
States  on  June  30,  191 1,  was  reported  at  #57,886,430,519  in 
capital  stock  and  #30,715,336,008  in  bonded  and  other  in- 
debtedness. This  aggregate  of  about  #88,600,000,000  can- 
not, however,  be  accepted  as  representing  tangible  assets 
without  several  qualifications.  The  most  important  quali- 
fication is  the  ownership  of  the  securities  of  one  corporation 
by  another,  which  results  in  a  duplication  of  securities 
without  a  corresponding  duplication  of  wealth.  Figures 
for  such  intercorporate  holdings  are  obtainable  only  for 
railways,  banks,  and  a  few  other  classes  of  corporations, 
but  it  is  certain  that  the  deductions  would  reduce  the  net 
wealth  in  corporate  form  to  #65,000,000,000  or  less,  which 
would  be  about  half  the  total  wealth  of  country. 


8o 


PROGRESS  OF  THE   EMPIRE   STATE 


The  share  of  New  York  in  the  outstanding  capital 
of  corporations  paying  the  tax,  on  June  30,  191 1,  was 
#14,532,108,376,  while  the  bonds  and  other  indebtedness  of 
such  corporations  amounted  to  #7,529,120,943,  the  two 
items  representing  one  quarter  of  the  total  for  the  entire 
country.  The  net  income  of  New  York  corporations  was 
stated  at  #689,414,892,  or  more  than  20  per  cent,  of  the 
reported  net  income  for  all  corporations,  which  was 
#3,360,250,642.  Upon  the  basis  of  the  tax  of  one  per  cent, 
upon  net  income  levied  by  the  law,  the  amount  paid  by  New 
York  corporations  was  approximately  #7,000,000. 

With  the  concentration  of  capital  in  New  York,  in- 
evitably came  concentration  of  banking  power.  Banks 
of  small  capital  and  limited  resources  were  incompetent  to 
cope  with  the  financial  problems  presented  by  the  merger  of 
institutions  like  the  steel  companies  and  the  tobacco  com- 
panies, or  to  command  the  resources  abroad  which  were 
occasionally  employed  to  meet  unusual  demands  upon  the 
New  York  money  market.  With  the  increased  concentra- 
tion of  banking  resources  came  also  concentration  of  power 
in  a  new  group  of  men,  who  controlled  these  resources  and 
brought  into  the  circuit  of  their  influence  other  institutions 
dealing  in  large  amounts  of  money,  like  the  railways  and 
the  insurance  companies. 

Evidence  that  the  generation  which  followed  the  Civil 
War  had  completed  its  work  was  afforded  by  the  passing 
away  of  its  leaders.  August  Belmont,  Sr.,  chairman  of 
the  Democratic  National  Committee,  as  well  as  financier, 
died  on  November  24,  1890 .  Two  years  later  passed  away, 
on  December  2,  1892,  Jay  Gould,  the  great  organizer  of 
corners  and  spectacular  market  moves,  who  belonged  really 
to  the  generation  of  the  war  rather  than  that  which  came 
after  it.  William  H.  Vanderbilt  had  already  died  on 
December  8,  1885,  his  death  bringing  to  an  end  the  stock 


(MfowT>   77.  ityfa^ 


THOMAS  F.  RYAN 

Financier;  born  in  Nelson  County,  Va.,  October  17,  1851. 
Went  to  Baltimore  at  age  of  seventeen  and  worked  in  drygoods 
commission  house  of  John  S.  Barry  until  1870,  when  he  went  to 
New  York  City.  Became  member  of  New  York  Stock  Exchange, 
1874,  and  soon  became  indentified  with  corporate  interests 
relating  especially  to  consolidating  and  extending  the  street 
railway  and  lighting  systems  of  New  York,  Chicago,  and  other 
large  cities,  being  associated  in  and  having  active  charge  of  enter- 
prises of  the  late  William  C.  Whitney  for  nearly  thirty  years. 
Went  to  London,  in  1902,  to  take  charge  of  fight  which  the 
American  Tobacco  Co.  was  then  making  against  the  Imperial 
Tobacco  Co.  for  a  division  of  world  territory  for  the  tobacco  trade, 
and  in  a  few  weeks  established  harmonious  relations  with  the 
British  corporation.  Was  a  leader  in  reorganization  of  Richmond 
&  Danville  system  into  present  Southern  Railway;  formed  and 
executed  the  plans  for  the  Central  of  Georgia  Railroad  &  Banking 
Co. ;  purchased  a  controlling  interest  in  the  stock  of  the  Equitable 
Life  Assurance  Society  of  the  United  States,  in  1905,  which  was 
placed  in  the  hands  of  trustees.  Director  of  the  Guaranty  Trust 
Co.,  American  Tobacco  Co.,  and  many  other  corporations. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK     8l 

market  boom  of  that  year.  Another  figure  long  known  in 
the  market,  Russell  Sage,  shrewd  reader  of  men  and  wizard 
of  money,  lingered  much  longer  on  the  stage,  active  to  the 
last.  Mr.  Sage  died  on  July  22,  1906,  and  his  great  fortune 
was  distributed  in  many  important  new  foundations  and 
other  benefactions  by  his  widow.  Cornelius  Vanderbilt, 
who  had  succeeded  William  H.  as  the  financial  head  of 
the  family,  died  on  September  12,  1899. 

Conspicuous  among  the  younger  group  of  men  who  came 
to  be  the  arbiters  of  nearly  everything  financial  in  New  York 
at  the  beginning  of  the  twentieth  century  were  J.  Pierpont 
Morgan,  William  C.  Whitney,  Thomas  F.  Ryan,  James 
Stillman,  E.  H.  Harriman,  the  sons  of  Jay  Gould,  Henry 
H.  Rogers,  and  the  Rockefellers.  The  preeminence  of 
Mr.  Morgan  dated  back  farther  into  the  nineteenth  century 
than  that  of  some  of  his  associates.  Born  and  brought  up 
with  the  most  scholarly  tastes  and  love  of  the  beautiful, 
Mr.  Morgan  nevertheless  entered  a  banking-house  in  youth 
and  bent  his  energy  in  middle  life  to  the  consummation  of 
some  of  the  greatest  financial  enterprises  of  the  time. 

Mr.  Morgan's  first  appearance  in  a  conspicuous  manner 
was  characteristic  of  his  character  as  one  who  always  sought 
to  build  up  values  rather  than  to  pull  them  down.  At 
a  time  when  the  New  York  Central  and  the  Pennsylvania 
were  competing  against  each  other,  in  1885,  until  New  York 
Central  dividends  had  been  reduced  from  eight  per  cent,  to 
two  per  cent.,  and  the  West  Shore  line  was  cutting  rates 
recklessly,  Mr.  Morgan  called  upon  George  B.  Roberts, 
president  of  the  Pennsylvania  Railway.  He  unfolded  a 
plan  by  which  the  warring  lines  might  come  to  an  agreement 
and  the  West  Shore  should  be  absorbed  by  the  New  York 
Central.  The  plan  was  accepted,  the  West  Shore  was 
leased  to  the  New  York  Central  from  January  1,  1886,  and 
the  latter  never  afterwards  ceased   to  pay  a  respectable 


82  PROGRESS  OF  THE   EMPIRE  STATE 

dividend.  Mr.  Morgan  again  showed  his  capacity  as  a 
peacemaker  when  he  called  a  meeting  of  prominent  rail- 
way presidents  at  his  house  in  January,  1889,  to  form 
"The  Gentlemen's  Agreement"  for  maintaining  published 
rates.  This  agreement  remained  in  force  for  many  years 
and  relieved  the  railway  situation  of  many  uncertainties. 

Mr.  Morgan  rescued  the  Government  from  specie  sus- 
pension by  the  syndicate  contract  to  control  exchange  in  the 
spring  of  1895.  This  achievement  alone  made  him  one  of  the 
most  conspicuous  men  of  his  time,  as  well  as  one  of  the  most 
abused  by  noisy  demagogues  and  jealous  rivals.  Other 
important  banking  operations  were  crowned,  however,  by 
the  creation  of  the  United  States  Steel  Corporation,  the 
largest  corporation  in  the  world,  formed  from  fourteen  large 
steel  companies,  controlling  about  60  per  cent,  of  the  great 
output  of  steel  in  the  United  States,  and  having  capital 
liabilities  of  more  than  #1,325,000,000.  Probably  no  cor- 
poration ever  formed  had  so  many  shareholders  or  became 
a  subject  of  such  general  interest  among  small  investors. 
Mr.  Morgan  suffered  somewhat  in  prestige  when  the  stock 
market  break  of  1903  carried  Steel  common  stock  down  from 
40  to  10  and  preferred  from  89^  to  49K.  But  the  early 
suspension  of  dividends  on  common  stock  contributed  to  the 
accumulation  of  the  great  surplus  planned  to  meet  just  such 
emergencies  in  the  future,  and  with  the  resumption  of 
business  activity  in  1904  the  foresight  and  conservatism  of 
the  great  financier  were  in  a  large  measure  vindicated. 
With  this  achievement  Mr.  Morgan  rested  to  some  extent 
upon  his  laurels,  devoting  himself  to  obtaining  for  Ameri- 
can art  galleries  some  of  the  most  precious  work  of  the  old 
masters  and  accumulating  in  his  magnificent  library  in  the 
heart  of  the  city  some  of  the  rarest  and  choicest  examples  of 
the  bookmaker's  art,  from  the  illuminated  handwork  of  early 
times  down  to  the  invention  of  printing  and  the  most  per- 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK      83 

feet  examples  of  modern  binding.  But  in  the  panic  of  1907 
he  again  came  to  the  front  as  the  one  man  in  whose  dis- 
interestedness and  skill  the  entire  community  trusted — 
the  one  safe  pilot  for  riding  out  the  storm  and  saving  the 
financial  craft  from  shipwreck. 

Mr.  William  C.  Whitney  won  his  first  laurels  in  the  field 
of  politics.  As  a  friend  of  Samuel  J.  Tilden,  he  had  a  share 
in  breaking  up  the  Tweed  ring.  As  a  friend  of  Grover 
Cleveland,  he  became  Secretary  of  the  Navy  and  had  much 
to  do  with  laying  the  foundations  of  that  great  arm  of  the 
service  which  now  counts  more  battleships  and  cruisers  than 
there  are  States  of  the  Union.  When  Mr.  Whitney  came 
back  to  New  York  in  1889  it  was  realized  that  he  would  be 
a  power  in  the  world  of  finance.  He  at  once  took  hold  of  the 
traction  problem  and  began  the  organization  of  the  great 
system  which  was  to  replace  the  confused  network  of  inde- 
pendent lines  with  which  New  Yorkers  were  then  served. 
Without  some  such  guiding  hand  as  his,  the  transportation 
service  must  utterly  have  broken  down  with  the  increase 
of  population.  So  rapid  has  been  this  increase,  from  im- 
migration as  well  as  births,  that  probably  not  fifty  per  cent, 
of  the  existing  inhabitants  of  New  York  recall  the  time  when 
through  competing  and  independent  lines  there  were  neither 
free  transfers  nor  continuous  transportation  for  any  con- 
siderable distance;  when  horses  were  only  gradually  giving 
way  to  cable  and  electric  power,  and  a  line  on  Broadway 
was  secured  only  in  the  face  of  tremendous  opposition. 
It  was  out  of  this  chaos  that  Mr.  Whitney  created  the 
Metropolitan  Street  Railway  system,  with  transfers  gen- 
erously given  at  every  connecting  point  where  the  efficiency 
of  the  service  permitted  and  with  continuous  runs  for  a 
single  fare  longer  probably  than  are  accorded  in  any  city 
of  the  world.  Mr.  Whitney  was  active  also  in  the  or- 
ganization of  new  banks  and  their  gradual  consolidation 


84  PROGRESS  OF  THE   EMPIRE   STATE 

into  institutions  capable  of  competing  successfully  with 
their  rivals. 

Associated  with  Mr.  Whitney  in  most  of  these  ventures 
was  another  man,  who  usually  preferred  silence  to  loquacity 
and  quiet  self-effacement  to  publicity.  But  when  in  June, 
1905,  this  man  suddenly  rescued  the  financial  situation  from 
disaster  by  the  purchase  for  $2,500,000  of  a  controlling  in- 
terest in  the  stock  of  the  Equitable  Life  Assurance  Society, 
the  figure  of  Thomas  F.  Ryan  loomed  large  upon  the  na- 
tional horizon.  Men  in  New  York  familiar  with  Wall  Street 
already  knew  that  Mr.  Ryan  wielded  a  power  and  had  con- 
structive genius  similar  to  those  which  Commodore  Vander- 
bilt  or  Mr.  Whitney  possessed  while  living  and  which  Mr. 
Morgan  had  demonstrated  in  the  formation  of  the  Steel 
Corporation.  To  the  general  public,  however,  the  fact  that 
these  great  names  had  a  competitor  in  the  person  of  a  retir- 
ing, silent  man  from  Virginia  was  comparatively  unknown. 
Coming  from  the  South,  Mr.  Ryan  was  naturally  a  Demo- 
crat and  wielded  a  forceful  influence  upon  the  destinies  of 
his  party.  When  the  National  Convention  of  1904  was 
on  the  point  of  breaking  into  revolt  against  the  gold  telegram 
of  Judge  Parker,  it  was  Mr.  Ryan,  as  a  delegate  from  Vir- 
ginia, who  quietly  drew  one  leader  after  another  into  con- 
ference and  brought  them  to  the  conviction  that  there  was 
no  hope  for  the  party  except  in  cordial  acceptance  of  Judge 
Parker's  position. 

To  no  man  in  the  financial  world,  perhaps,  can  be  attri- 
buted more  important  constructive  work  than  to  Mr.  Ryan. 
Greatest  of  all,  perhaps,  was  the  gradual  weaving  into  a 
compact  body  of  the  scattered  tobacco  interests  of  the 
country  (more  fully  described  elsewhere),  until  the  Ameri- 
can Tobacco  Company  came  to  control  eighty  or  ninety  per 
cent,  of  the  business  of  the  United  States  and  was  able  to 
dictate  terms  in  regard  to  the  trade  of  the  world  to  the 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK     85 

Tobacco  Trust  of  Great  Britain.  The  work  of  consolidating 
into  the  American  Tobacco  Company  several  large  com- 
panies previously  organized,  which  was  accomplished  in  the 
autumn  of  1904,  involved  the  exchange  of  securities  to  the 
amount  of  over  #600,000,000 — the  largest  transaction  of 
the  kind  in  financial  history.  Already  in  the  autumn  of  1903, 
when  Mr.  Ryan,  having  acquired  control  of  several  national 
banks,  united  them  with  the  National  Bank  of  Commerce 
with  a  capital  of  #25,000,000  and  a  surplus  of  #10,000,000,  it 
was  pointed  out  that  the  interests  represented  had  resources 
of  more  than  a  thousand  millions  of  dollars.  Within  the 
sphere  of  influence  of  Mr.  Ryan  and  his  immediate  associates 
were  gathered  the  reserves  and  surplus  of  the  Mutual  Life, 
the  Equitable  Life,  and  the  Washington  Life,  having  ad- 
mitted assets  of  more  than  $800,000,000;  the  deposits  of 
the  National  Bank  of  Commerce,  amounting  to  nearly 
#200,000,000;  and  the  resources  of  the  Morton  Trust  Com- 
pany, the  Guaranty  Trust  Company,  the  Mercantile  Trust 
Company,  and  the  Equitable  Trust  Company,  amounting 
to  about  #200,000,000 — a  total  of  #1,200,000,000,  or  more 
than  the  ransom  which  France  paid  to  Germany  for  the  lib- 
eration of  her  territory  in  1870,  or  Japan  sought  to  exact 
from  Russia  in  1905. 

At  the  head  of  another  financial  group  of  great  power 
stood  another  man  of  eloquent  silences — James  Stillman, 
president  of  the  National  City  Bank.  Descended  from  an 
old  English  family,  he  showed  early  in  his  career  the  quiet 
reserve  power,  the  ability  to  listen  to  what  others  said  and 
then  with  unerring  judgment  to  sift  the  wheat  from  the 
chaff,  which  mark  most  of  the  men  who  have  become  power- 
ful in  finance.  When  the  City  Bank  increased  its  capital 
first  to  #10,000,000  and  then  in  1902  to  #25,000,000,  there 
were  many  who  believed  that  it  was  Mr.  Stillman's  ambition 
to  create  the  dominating  banking  institution  of  the  country. 


86  PROGRESS  OF  THE   EMPIRE   STATE 

This  belief  was  not  impaired  by  the  prominent  part  which 
was  taken  by  the  bank  in  the  flotation  of  Amalgamated 
Copper,  with  its  capital  stock  of  #155,000,000 — which 
brought  the  bank  into  even  closer  relations  than  before  with 
another  silent  man  of  action,  Henry  H.  Rogers — nor  by  the 
enlistment  of  the  services  as  vice-president  of  Frank  A. 
Vanderlip,  who  had  made  a  remarkable  record  as  Assistant 
Secretary  of  the  Treasury  with  Secretary  Gage.  Gradually 
within  the  circle  of  influence  of  the  National  City  Bank  was 
brought  a  powerful  group  of  banks,  trust  companies,  and 
industrial  corporations  representing  many  hundreds  of  mil- 
lions of  dollars,  of  which  not  the  least  was  Standard  Oil,  with 
a  capital  issued  at  #100,000,000,  but  worth  in  the  market 
over  #500,000,000. 

A  name  scarcely  known  in  the  financial  world  prior  to 
1898  suddenly  became  the  most  talked  of  in  American 
finance  when  the  directors  of  the  Union  Pacific  Railway,  in 
August,  1906,  announced  a  dividend  at  the  rate  of  ten  per 
cent,  on  the  common  stock — six  per  cent,  from  earnings  on 
operations  and  four  per  cent,  from  investments.  Startling 
and  somewhat  disturbing  as  the  announcement  was  from  a 
stock  market  point  of  view,  it  told  in  eloquent  figures  the 
result  of  ten  years  of  silent,  systematic  labor.  For  thirty 
years  up  to  1896  the  Union  Pacific  had  dragged  along  under 
varying  fortunes,  weighted  by  a  heavy  debt  to  the  Govern- 
ment, until  finally  it  went  into  the  hands  of  a  receiver. 
The  competition  of  the  Southern  Pacific  had  been  one  of  the 
causes  of  this  decline,  and  to  bring  this  to  an  end  a  controlling 
interest  in  Southern  Pacific  was  acquired  and  put  into  the 
treasury  of  Union  Pacific.  Then  came  the  wonderful  physi- 
cal development  of  both  roads,  which  discarded  outworn 
rails,  equipment,  bridges,  and  even  terminals  and  parts  of  the 
roadbed,  and  raised  them  to  the  efficiency  of  modern  tools 
of  transportation.     Gross  earnings  of  Union  Pacific  leaped 


SAMUEL   SLOAN 

Railway  president  and  capitalist;  born  in  Ireland,  December  25, 
1817;  came  to  America  and  graduated  at  Columbia  College 
Grammar  School  in  1831;  married  Margaret  Elmendorf.  Presi- 
dent of  the  Hudson  River  Railroad  from  1855  to  1865;  president 
of  the  Delaware,  Lackawanna  &•  Western  Railway  from  1867  to 
1 899;  officer  and  director  in  many  other  corporations.    Died,  1907. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK      87 

from  #19,811,641  in  1899  to  $59,324,948  in  1905,  and  net 
earnings — in  the  face  of  greatly  increased  charges,  bravely 
assumed  to  obtain  new  capital — increased  from  $9,388,208 
to  $33,958,993. 

It  is  not  surprising  that  achievements  like  these  brought 
Mr.  Edward  H.  Harriman  into  the  circle  of  the  half-dozen 
group  of  capitalists  who,  with  the  aid  of  foreign  and  home 
bankers,  shape  the  policy  of  the  great  railway  systems  of  the 
country.  Six  of  the  railroad  groups,  according  to  the  cal- 
culations of  Mr.  Sereno  S.  Pratt  in  The  Work  of  Wall 
Street,  represented  in  1903  $6,766,000,000 — or  about  one 
half  the  railway  capitalization  of  the  United  States.  The 
Vanderbilt  group,  representing  the  New  York  Central  and 
its  connecting  lines,  stood  for  $1,157,000,000;  the  Penn- 
sylvania group,  under  the  far-sighted  leadership  of  Mr. 
A.J.  Cassatt,$i, 341,000,000;  the  Gould  group,  $810,000,000; 
the  Morgan-Hill  group,  controlling  the  Northern  Pacific  and 
other  roads  which  were  pooled  in  the  Northern  Securities 
Company,  $1,398,000,000;  the  Morgan  group  proper,  in- 
cluding the  Reading  and  Southern,  $1,014,000,000;  and  the 
Harriman  group,  which  raised  to  a  dominant  position  the 
Union  Pacific,  $1,046,000,000. 

With  the  growth  in  the  demands  upon  New  York  as 
a  financial  center  naturally  occurred  the  extension  of  the 
machinery  for  carrying  on  exchange,  both  by  the  expan- 
sion of  old  parts  of  the  mechanism  and  the  creation  of 
new  parts.  As  the  creation  of  such  instrumentalities 
went  on  in  a  measure  pari  passu  with  the  demand  for 
them,  they  contributed  their  share  towards  making  the 
city  of  New  York  the  undisputed  center  of  exchange 
in  America.  Among  the  parts  of  the  mechanism  con- 
tributing to  this  result  which  deserve  some  notice  here 
may  be  named  the  reserve  requirements  of  the  national 
banking  system;  the  extension  of  the  functions  and   re- 


88  PROGRESS  OF  THE   EMPIRE  STATE 

sources  of  trust  companies ;  the  operation  of  powerful  foreign 
banking  houses;  the  perfection  of  organization  of  the  Clear- 
ing House,  the  Stock  Exchange,  and  the  Stock  Exchange 
Clearing  House;  and  the  extension  of  the  mechanism  for 
gathering  news  of  mercantile  credit.  All  these  agencies  have 
worked  in  harmony  towards  drawing  surplus  resources  and 
the  financial  operations  of  the  country  from  smaller  cities, 
once  important,  to  New  York. 

While,  even  before  the  Civil  War,  considerable  deposits 
were  kept  in  New  York  by  country  banks,  growing  out  of 
the  import  and  export  business  and  necessary  operations  in 
foreign  and  domestic  exchange,  it  was  the  National  Banking 
Act  which  consecrated  by  law  this  tendency  towards  keeping 
surplus  funds  in  the  metropolis.  This  act  authorized  na- 
tional banks  to  count  as  a  part  of  their  lawful  reserves  money 
kept  on  deposit  with  national  banks  in  New  York.  The 
banks  of  reserve  cities  were  allowed  to  keep  half  of  their  re- 
quired reserve  of  25  per  cent,  in  New  York,  while  the 
country  banks  were  permitted  to  keep  three  fifths  of  their 
reserve  of  15  per  cent,  in  national  banks  in  any  reserve 
city.  Hence  was  given  definite  legal  sanction  to  the  prin- 
ciple of  the  redeposit  of  surplus  funds  in  the  financial  cen- 
ter, and  the  creation  of  a  system  of  relationships  similar  to 
that  between  the  country  banks,  the  joint  stock  banks,  and 
the  central  bank  of  issue  in  England,  except  that  in  New 
York  there  was  lacking  the  central  bank  of  issue  with  such 
special  powers  as  are  found  in  the  Bank  of  England. 

For  many  years  the  reserves  kept  by  country  banks 
in  New  York  were  only  such  as  were  required  to  meet  the 
many  demands  made  upon  them  for  drafts  on  New  York 
in  the  course  of  current  business  and  such  additional  amounts 
as  might  afford  a  reserve  resource  in  case  of  emergency.  The 
New  York  banks  paid  from  one  and  a  half  to  two  per  cent,  in- 
terest on  such  deposits,  which  added  something  to  the  disposi- 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK     89 

tion  of  the  country  bank  to  increase  them  at  such  seasons  of 
the  year  as  there  was  no  active  demand  for  capital  at  home. 
With  the  formation  of  the  large  industrial  combinations, 
however,  the  tendency  was  accentuated  to  increase  such 
deposits.  Such  of  these  new  corporations  as  were  financed 
upon  a  sound  basis  found  it  no  longer  necessary  to  borrow 
on  their  commercial  paper  to  the  same  extent  as  the  private 
partnerships  and  smaller  corporations  from  which  they  had 
been  formed.  They  were  at  once  able  to  carry  on  their 
transactions,  to  a  larger  extent  than  formerly,  without  re- 
liance upon  credit,  and  also  felt  under  the  necessity,  in  view  of 
the  magnitude  of  their  operations,  of  keeping  their  funds 
either  directly  in  New  York  or  with  the  banks  in  other 
reserve  cities  with  which  they  did  business.  In  many  cases, 
also,  industries  located  far  from  New  York  and  previously 
concerned  only  incidentally  with  New  York  banks  found  it 
convenient  to  establish  their  financial  headquarters  in  the 
metropolis.  Hence  came  about  the  rapid  increase,  after  the 
business  revival  of  1897,  in  the  deposits  of  outside  banks 
with  the  national  banks  of  New  York.  The  gross  amount 
of  such  deposits  early  in  1890,  as  appears  in  the  table  be- 
low, was  about  #181,000,000.  It  had  grown  in  1900  to 
$337,000,000  and  in  1905  to  $574,000,000.  This  was  the 
maximum  point  for  several  years  in  the  gross  amount  of  such 
deposits,  but  the  total  did  not  materially  decline.  It  came 
to  include,  not  only  large  reserve  deposits  from  country 
banks  under  the  national  banking  law,  but  similar  deposits 
from  State  banks  and  trust  companies  away  from  New  York, 
made  in  many  cases  under  the  sanction  of  State  laws  regard- 
ing reserves  similar  in  character  to  the  law  regulating 
national  banks.  Deposits  of  this  character  for  representa- 
tive years  appear  in  the  following  table ' : 

'As  the  table  indicates,  obligations  of  national  banks  to  trust  companies  and  sav- 
ings banks  were  not  separately  stated  prior  to  1901 .     They  were  included  for  the  most 


90  PROGRESS  OF  THE   EMPIRE   STATE 

Obligations  of  New  York  National  Banks  to 
Other  Banks 

_  „  ,  _.  Due  to  Trust 

Due  to  Other  Due  to   State  and  Companies  and 

Date.  National  Banks.  Private  Banks.  Savings  Banks. 

Feb.   28,  1890 $132,153,883  $48,789,916     

Mar.  I  1,  1892 180,790,947    67,239,327     

Mar.     s,  1895 137,164,947    63,296,138     

Feb.   28,  1896 123,230,639     57,641,674     

Feb.    18,  1898 240,843,341     93,457,882     

Feb.    13,  1900 228,962,669  108,462,938     

Feb.     5,1901 285,094,297    76,379,527  £115,666,821 

Feb.   25,  1902 280,143,382    78,631,486  113,809,652 

Feb.     6,1903 267,800,429    72,116,870  114,648,379 

Jan.   22,  1904 269,619,228     72,971,618  135,514,319 

Jan.    11,1905 290,468,525     83,757,041  199,823,107 

Jan.    29,1906 285,815,239     88,840,306  148,202,909 

Jan.    26,  1907 309,315,507     84,548,146  126,541,010 

Feb.    14,1908 275,829,880    71,708,337  166,389,115 

Feb.     5,1909 364,338,302    94,074,497  225,457,661 

Jan.   31,  1910 306,912,760    95,118,322  199,218,678 

Jan.     7,1911 329,301,120    93,589,388  182,858,268 

Sept.    4,1912 345,018,691102,677,619  197,339,597 

These  banking  reserve  deposits  are  an  important  factor 
in  the  recent  expansion  of  the  resources  of  New  York  banks, 
but  they  are  only  one  of  several  factors  which  indicate  the 
manner  in  which  New  York  has  gathered  to  herself  the 
financial  primacy  of  the  United  States.  The  resources  of 
national  banks  in  New  York  have  not  grown  at  a  rate  much 

part  under  the  head  of  "Amounts  Due  to  State  and  Private  Banks,  "as  is  shown  by 
the  shrinkage  in  the  latter  item  when  the  items  were  separately  stated.  It  is  not 
improbable,  however,  that  some  of  the  obligations  to  trust  companies  and  savings 
banks  were  lumped  with  individual  deposits  prior  to  1901,  so  that  the  growth  in  the 
two  items  after  they  were  separately  stated  may  appear  to  be  somewhat  greater  than 
the  actual  fact.  A  qualification  of  this  kind,  however,  detracts  little  from  the  com 
parative  value  of  the  figures. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK      91 

more  rapid  than  those  of  the  national  banks  of  the  country, 
but  New  York  has  undoubtedly  gained  over  formerly  strong 
rivals  and  a  part  of  the  gain  for  the  rest  of  the  country  has 
been  spread  out  laterally  over  sections  formerly  undeveloped. 

The  growth  of  resources  of  national  banks  affords  only 
a  partial  index,  however,  of  the  increased  banking  power 
put  at  the  command  of  New  York  captains  of  finance  within 
the  past  decade.  A  new  weapon  has  been  forged  in  the 
trust  company,  which  sometimes  antagonizes  national  and 
State  banking  interests,  but  more  often  supplements  and  aids 
them.  The  trust  company  was  organized  primarily  to 
supply  the  need  for  greater  system  in  dealing  with  trust 
obligations.  Even  down  to  the  present  time,  the  trust 
company  has  not  become  important  in  Europe,  where  rail- 
way mortages  and  similar  obligations  are  in  the  hands  of 
individual  trustees.  The  formation  of  new  railway  corpora- 
tions and  the  issue  of  new  securities  by  old  corporations  in  the 
process  of  combining  and  reorganizing  after  the  panic  of  1893 
made  it  of  the  highest  importance  that  issues  of  securities 
for  such  purposes  should  be  carefully  supervised.  Acting  as 
trustee,  as  registrar,  and  as  transfer  agent,  the  trust  com- 
pany afforded  a  security  to  the  public  which  was  not  afforded 
by  the  old  system  of  individual  trusteeship  and  of  registra- 
tion and  transfer  at  the  office  of  the  corporations  issuing 
securities.  Hence  arose  an  important  function  which  could 
not  well  be  assumed  by  national  banks.  In  respect  to  private 
trusts  also,  the  trust  company  was  found  more  satisfactory 
in  many  respects  than  individual  trustees,  because  of  its 
continuing  corporate  obligation,  its  office  force  and  vaults 
especially  created  for  this  service,  and  the  greater  security 
and  uniformity  of  methods  to  which  such  an  organization 
contributed. 

Very  quickly  after  their  organization,  however,  trust 
companies  added  to  their  strictly  trust  functions  various 


92  PROGRESS   OF  THE   EMPIRE  STATE 

forms  of  banking  activity.  Receiving  at  first  deposits  in 
trust,  in  accordance  with  their  nominal  purpose,  upon  which 
they  paid  interest,  they  became  attractive  to  depositors 
for  any  funds  which  were  not  in  daily  use.  Hence  arose  the 
certificate  of  deposit  for  a  fixed  term,  upon  which  interest 
was  given  at  rates  ranging  as  high  as  three  and  occasionally 
even  four  per  cent.  From  receiving  these  more  or  less 
permanent  deposits,  it  was  an  easy  step  to  receiving  accounts 
which  were  more  active.  The  stronger  trust  companies  of 
the  city  of  New  York,  however,  did  not  as  a  rule  compete 
either  for  active  deposit  accounts  or  for  commercial  loans. 
The  fact  that  they  paid  interest  on  deposits  absolved  them 
from  the  obligation  to  accommodate  their  depositors  with 
loans,  which  is  tacitly  assumed  by  a  national  jbank  dealing 
with  mercantile  clients.  The  trust  companies,  therefore, 
employed  the  funds  at  their  disposal  to  a  large  extent  in 
loans  secured  by  the  deposit  of  stocks  and  bonds.  In  this 
respect  their  policy  did  not  differ  from  that  of  national 
banks,  except  that  many  of  the  stronger  trust  companies 
limited  their  operations  to  this  type  of  loans  and  did  nothing 
in  commercial  paper. 

Only  by  such  machinery  as  that  of  the  New  York  Clear- 
ing House  would  it  have  been  possible  to  carry  on  the  great 
transactions  of  the  period  of  prosperity  which  followed  the 
depression  of  1893-97.  The  clearing  system  is  a  develop- 
ment of  a  principle  of  a  Roman  commercial  law  known  as 
compensatio — the  setting  off  of  a  debt  which  one  owes  to 
another  by  a  claim  against  him.  This  principle  became 
familiar  in  merchandise  transactions  at  the  great  fairs  of  the 
Middle  Ages,  but  was  not  applied  definitely  to  modern 
banking  until  the  foundation  of  the  Edinburgh  Clearing 
House  in  1760  and  that  of  London  about  1775.  London 
banks  down  to  about  the  latter  date  sent  out  clerks  daily  to 
collect  from  other  banks  the  notes  and  other  obligations  of 


o^yh 


ISAAC  NEWTON  SELIGMAN 

Banker;  horn  Staten  Island,  N.  Y.,  July  10,  1856;  son  Joseph 
and  Babette  (Steinhardt)  Scligman;  brother  of  E.  R.  A.  Seligman 
of  Columbia  University;  A.B.,  Columbia,  1876;  married  Guta, 
daughter  of  Solomon  and  Betty  Loeb,  1883.  Was  member  of  the 
victorious  Columbia  "eight,"  which  defeated  Harvard,  Yale,  and 
other  crews  on  Saratoga  Lake,  1874.  In  banking  business  since 
1876;  member  firm  of  J.  &  W.  Scligman  &  Co.,  bankers,  New 
York,  siii'  rustee   Munich   Life  Insurance  Co.,  Russia 

Life  Reinsurance  Co.,  United  States  Savings  Bank,  Lincoln 
Trust  '  int  Morris  National  Bank;  treasurer  and  director 

City  &  Suburban  1!  .  vice-president  of  United  Hebrew 

Charities,  St.  John's  Guild,  National  Child  Labor  Commission, 
Chamber  of  Commerce  (tax  commission),  Legal  Aid  Society, 
City  Club;  treasurer  Citizens'  Union;  treasurer  Hudson-Fulton 
Memorial  Commission;  vice-president  and  treasurer  Andrew 
H.  Green  Memorial  Association;  vice-president  and  treasurer  Carl 
Schurz  Memorial  Committee;  Member  Academy  Political  and 
Social  Science. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK     93 

such  banks  which  had  fallen  into  their  hands.  This  re- 
quired each  bank  to  keep  a  large  amount  of  money  and  led 
the  bankers  to  determine  upon  a  common  meeting  place  for 
their  clerks  for  the  settlement  of  balances. 

A  similar  plan  was  proposed  in  New  York  by  Albert 
Gallatin  in  a  pamphlet  published  in  183 1,  but  no  definite 
action  was  taken  until  1853.  The  number  of  banks  in  New 
York  had  increased  from  twenty-four  in  1849  to  sixty  within 
four  years.  At  first  it  was  sought  to  obviate  the  difficulty 
and  expense  of  having  sixty  porters  on  the  move  daily  from 
bank  to  bank  by  permitting  weekly  settlements  on  Friday 
mornings,  but  this  arrangement  was  taken  advantage  of 
by  some  of  the  weaker  banks,  to  borrow  of  the  larger  ones  by 
drafts  during  the  week,  which  were  paid  only  on  the  eve 
of  the  settlement.  Finally,  after  much  confusion,  a  clearing 
house  arrangement  was  made  which  took  effect  October  1, 

1853- 

The  economy  in  the  use  of  money  realized  by  the  clearing 

system  has  been  in  New  York  about  95  per  cent,  of  the 
volume  of  transactions.  Greatly  as  their  aggregate  has 
grown  since  1863,  the  average  daily  balances  over  a  year 
which  have  been  paid  in  money  have  not  been  higher  than 
6.71  per  cent  (in  1895)  nor  lower  than  2.99  per  cent,  (in 
1869).  The  variations  have  undoubtedly  been  greater  for 
single  days,  and  are  subject  to  the  accidents  of  exceptional 
balances  for  or  against  particular  banks.  The  aggregate  of 
clearing  transactions  is  greatly  influenced  by  the  state  of 
trade.  Clearings  at  New  York  were  reduced  in  volume  be- 
ginning with  1892  by  the  creation  of  the  Stock  Exchange 
Clearing  House.  Making  some  allowance  for  this  influence, 
the  variations  in  average  daily  clearings  under  different  busi- 
ness conditions  may  be  deduced  from  the  following  table1: 

1  This  tabic  is  adapted  from  the  author's  Principles  of  Money  and  Banking,  vol. 
ii.,  p.  243. 


94 


PROGRESS  OF  THE   EMPIRE  STATE 


Variations  in  Clearings  at  New  York 
(Year  ending  September  30.) 


Year. 

Average  Daily     ] 
Clearings. 

Per  Cent. 
Balances  to 
Clearings. 

I87O.  .  . 

•£90,274,479 

372 

1873... 

•115,885,794 

415 

1874  ... 

•      74,692,574 

5.62 

l88l... 

•159,232,191 

3-66 

I885... 

.      82,789,480 

5-12 

I89O. . . 

.123,074,139 

4-65 

I894... 

.      79,704,426 

6-54 

I896. . . 

•      96,232,442 

6.28 

I899... 

.  l89,96l,029 

5-37 

I90I . . . 

•254,193,639 

4-56 

I9O4... 

.195,648,514 

5.20 

I905 . . . 

.302,234,600 

4-33  ' 

I906.   .   . 

.342,422,773 

3.69  1 

I907... 

•313,537,570 

4.00 

1908. . . 

.241,413,023 

4-63 

I9O9. . . 

.326,505,468 

4.22 

I9IO. . . 

.338,461,911 

4.09 

Remarks. 


Great  business  activity. 

Industrial  depression. 

Renewal  of  railway  building. 

Results  of  bank  panic. 

Business  expansion. 

Depression  following  panic. 

Free-silver  panic. 

Renewed  confidence  and  ac- 
tivity. 

Culmination  of  industrial  flo- 
tations. 

Diminished  Stock  Exchange 
operations  and  business  ac- 
tivity. 

Renewal  of  business  activity 
and  speculation. 

Reaction  from  panic  of  1907. 


The  settlements  in  New  York  are  made  nominally  in 
money,  but  actual  transfers  of  coin  and  legal  tender  cur- 
rency have  been  reduced  to  a  minimum  within  the  last  few 
years.  United  States  currency  certificates,  issued  by  an 
Assistant  Treasurer  of  the  United  States  in  denominations  of 
not  less  than  $5000,  upon  the  deposit  with  him  of  United 
States  notes,  were  largely  used  at  one  time,  but  authority  for 
their  issue  was  repealed  in  1900.     After  the  completion  of  the 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK     95 

new  Clearing  House  on  Cedar  Street,  early  in  1896,  gold 
certificates  issued  by  the  Clearing  House  upon  deposits  of 
gold  coin  made  in  its  vaults  came  into  general  use.  The 
certificates  are  used  only  between  banks,  and  may  be  pre- 
sented at  any  time  for  redemption  in  the  gold  which  they 
represent. 

The  rapid  expansion  of  the  business  in  foreign  exchange 
has  naturally  brought  wealth  and  importance  to  the  houses 
carrying  it  on.  Early  in  the  nineteenth  century  London 
bankers  began  to  establish  branch  houses  in  Wall  Street. 
In  1825  the  existing  house  of  Brown  Brothers  &  Company 
was  established  as  an  offshoot  of  Alexander  Brown  &  Sons  of 
London.  In  1837  August  Belmont,  the  senior,  was  ap- 
pointed representative  of  the  Rothschilds  in  New  York,  and 
this  connection  has  ever  since  been  maintained.  Mr. 
Belmont  became  not  only  a  financier  whose  views  were  always 
sought  on  business  questions,  but  a  figure  of  first  importance 
in  the  civic  life  of  the  city  and  the  affairs  of  the  nation.  For 
many  years  his  position  as  chairman  of  the  Democratic 
National  Committee  gave  him  an  influence  which,  while  the 
country  was  passing  through  severe  financial  storms,  was 
steadily  exerted  on  the  side  of  conservatism  and  sound 
money. 

Of  the  three  sons  of  August  Belmont  two  became  active 
in  public  affairs,  while  to  August  Belmont,  Jr.,  was  left  the 
practical  management  of  the  great  banking  house.  Mr. 
August  Belmont,  Jr.,  rendered  perhaps  the  greatest  service 
to  the  city  when  he  staked  his  financial  reputation  upon  the 
construction  of  the  first  subway.  Mr.  Belmont  already 
represented  large  interests  in  the  Manhattan  elevated  lines 
and  when  the  subway  was  proposed  recognized  the  fact  that 
the  two  systems  might  be  dangerous  competitors.  When 
the  Rapid  Transit  Commission  first  proposed  their  com- 
prehensive  program   for  the  construction  of  the  subway 


96  PROGRESS   OF  THE   EMPIRE  STATE 

and  the  tunnels  under  the  East  River,  capitalists  were  timid 
about  entering  upon  a  project  so  large  and  uncertain.  But 
Mr.  Belmont,  with  that  foresight  which  characterized  so 
strongly  the  European  founders  of  his  house,  the  Rothschilds, 
assumed  the  risks  of  the  work  and  soon  united  the  elevated 
and  subway  systems  by  guaranteeing  interest  at  the  rate  of 
seven  per  cent,  upon  the  Manhattan  Elevated  stock. 

The  important  house  of  the  Belmonts  thus  became 
closely  identified  with  the  civic  life  of  New  York  and  the 
prosperity  of  the  nation.  This  was  equally  true — at  least  on 
the  broader  side  of  the  subject — of  the  other  great  houses 
which  dealt  in  foreign  exchange.  Their  ordinary  exchange 
business,  based  upon  commercial  bills,  was  given  volume  and 
variety  by  the  relations  established  with  European  bankers 
for  the  flotation  of  railway  and  industrial  loans  and  the 
temporary  transfer  of  funds  to  take  advantage  of  differences 
in  interest  rates  or  for  the  relief  of  the  money  market. 

Among  the  strongest  of  the  other  foreign  banking  houses 
may  be  named,  as  typical  of  the  rest,  Kuhn,  Loeb  &  Com- 
pany, J.  &  W.  Seligman  &  Company,  Speyer  &  Company, 
and  Ladenburg,  Thalmann  &  Company.  Kuhn,  Loeb  & 
Company,  founded  in  1869,  became  one  of  the  largest  deal- 
ers in  railway  bonds,  establishing  close  connections  with 
large  lines  or  systems,  like  the  Pennsylvania,  the  New 
York  Central,  and  the  Union  Pacific.  Mr.  Jacob  H.  Schiff, 
the  present  head  of  the  firm,  is  one  of  New  York's  foremost 
citizens,  not  only  as  a  financier,  but  as  an  advocate  of  many 
important  public  measures  and  a  generous  supporter  of 
charities  and  philanthropic  work.  Mr.  Paul  Warburg, 
another  member  of  the  firm,  is  a  well-known  expert  in 
monetary  science  and  was  one  of  the  first  to  recommend  the 
introduction  upon  the  New  York  market  of  the  system  of 
acceptances,  so  widely  in  use  in  Europe. 

The  house  of  Seligman  was  founded  by  Jesse  Seligman, 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK      97 

the  eldest  of  eight  brothers,  who  was  educated  at  the  Uni- 
versity of  Erlangen  in  Bavaria  and  came  to  America  in 
1838  at  the  age  of  nineteen.  After  some  mercantile  ven- 
tures, he  was  attracted  by  the  possibilities  of  banking  offered 
by  the  Civil  War  and  in  1862  founded  the  house  of  J.  &  W. 
Seligman  &  Company  as  it  still  exists.  The  parent  house 
in  New  York  was  presided  over  by  Mr.  John  Seligman, 
assisted  by  his  brothers  James  and  Jesse.  Leopold  and  Isaac 
assumed  charge  of  the  house  established  in  London;  William 
became  resident  partner  of  the  branch  in  Paris;  and 
Henry  and  Abraham  were  resident  partners  at  Frankfort- 
on-the-Main.  Branches  were  also  established  in  New 
Orleans  and  at  other  points. 

The  first  notable  enterprise  of  Jesse  Seligman  was  the 
introduction  of  United  States  bonds  to  the  people  of 
Germany.  This  was  accomplished  in  the  year  1863,  when 
the  National  credit  was  in  its  most  uncertain  condition,  but 
was  crowned  with  gratifying  success — not  only  in  securing 
money  but  foreign  sympathy,  of  which  the  nation  then 
stood  sorely  in  need.  These  services  were  recognized  by 
the  Government  by  designating  the  Seligman  house  in 
London  as  the  authorized  European  depository  of  the  State 
and  Navy  departments.  Mr.  Seligman  was  active  in  the 
formation  of  the  syndicate  which  refunded  the  "five-twenty" 
bonds  in  1871  and  1872,  and  the  government  reports  deal- 
ing with  these  operations  are  full  of  dispatches  between  the 
Secretary  of  the  Treasury  and  the  Seligmans.  When  Jesse 
Seligman  died  on  April  25,  1880,  the  Secretary  of  the  Navy, 
the  Hon.  Richard  W.  Thompson,  addressed  a  letter  to  the 
House  recounting  the  services  which  Mr.  Seligman  had 
rendered  the  Navy  Department  in  the  summer  of  1877  by 
accepting  navy  drafts  when  the  appropriation  had  been 
exhausted,  in  the  belief  that  they  would  be  paid  from  the 
appropriation  for  the  next  year. 


98  PROGRESS  OF   THE   EMPIRE   STATE 

The  founder  of  Speyer  &  Company  was  Mr.  Philip 
Speyer  who  came  to  New  York  in  1837,  and  in  connection 
with  the  importation  of  English  goods  developed  a  business 
in  foreign  exchange.  A  few  years  later  was  formed  the  firm 
of  Philip  Speyer  &  Company,  and  this  name  was  used  until 
1878,  when  the  death  of  the  founder  led  to  the  change  of  the 
name  to  its  present  form,  Speyer  &  Company.  This  firm 
also  was  largely  instrumental  in  making  a  market  for  United 
States  bonds  in  England,  and,  in  view  of  their  great  rise 
after  the  Civil  War,  with  substantial  profits  to  their  clients, 
paved  the  way  for  the  introduction  of  other  types  of  securi- 
ties. During  the  creative  period  of  Amerian  railroading 
the  firm  was  successful  in  placing  in  England,  Germany,  and 
Holland  the  bonds  of  the  Central  Pacific,  Southern  Pacific, 
Illinois  Central,  St. Paul,  Pennsylvania,  Baltimore  &  Ohio, 
and  many  other  of  the  best  railway  securities.  The 
present  head  of  the  firm  is  Mr.  James  Speyer,  a  son  of 
Gustavus  Speyer  and  nephew  of  the  founder  of  the  house. 

When  trust  companies  assumed  in  a  measure  the  banking 
functions  which  it  was  felt  by  the  national  and  State  banks 
belonged  exclusively  to  themselves,  some  antagonism  arose 
between  these  different  institutions.  It  was  not  so  acute 
in  some  respects  as  it  might  have  been  if  many  of  the  strong- 
est trust  companies  had  not  been  closely  associated,  through 
community  of  ownership  and  control,  with  the  largest  nat- 
ional banks.  Thus,  the  National  City  Bank  was  in  close  alli- 
ance with  the  United  States  Trust  Company,  the  Farmers' 
Loan  and  Trust  Company,  and  the  New  York  Trust  Com- 
pany; while  common  interests  held  stock  in  the  National 
Bank  of  Commerce  and  in  the  Guaranty,  Mercantile,  and 
Equitable  trust  companies.  Notwithstanding  this  com- 
munity of  interest,  however,  the  active  managers  of  the 
banks  secured  the  adoption  of  rules  by  the  Clearing  House  on 
February  11,  1903,  requiring  trust  companies  which  cleared 


tmLt_ 


JAMES  ROLLAND  MORSE 

Merchant  and  foreign  exporter;  born  near  Ripon,  Wis.,  Janu- 
ary i,  1848;  educated  in  the  publii  Spent  many  years 
in  the  Orient  in  organizing  import  and  export  business  with 
America  and  largely  interested  in  the  American  Trading  Co., 
of  which  he  is  president.  Is  also  director  of  the  International 
Contr  •  Is  a  member  of  the  Yokohama  United 
Club  of  Tokio,  Japan,  the  Tokii  shanghai  Club,  and 
New  Engl  ind  director  of  the  American  Asiatic 
iciation. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK     99 

through  a  clearing  bank  to  maintain  cash  reserves  equal  to 
15  per  cent,  of  their  deposits. 

This  action  failed  for  the  moment  of  its  intended  effect. 
The  trust  companies  withdrew  from  the  Clearing  House  and 
for  several  years  checks  upon  them  were  collected  by  the 
primitive  method  of  messengers  from  every  'institution 
having  checks  against  a  given  trust  company  presenting 
them  for  payment  over  its  counter.  A  law  was  passed  at 
Albany  in  1906  requiring  trust  companies  to  keep  reserves 
against  demand  deposits  of  15  per  cent.,  of  which  one  third 
must  be  in  cash,  and  one  third  might  be  on  deposit  in 
national  banks  and  one  third  in  approved  securities.  It 
was  under  this  law  that  the  trust  companies  met  the  panic 
of  1907,  and  were  compelled,  like  the  national  banks  upon 
which  they  leaned,  to  suspend  or  greatly  limit  their  payments 
of  currency  to  depositors.  The  panic  was  followed  by  the 
law  of  1908,  raising  the  requirement  of  actual  cash  against 
demand  deposits  to  15  per  cent.,  and  carefully  defining 
what  constituted  such  deposits.  While  this  requirement 
was  a  great  improvement  over  the  earlier  law,  it  left  still 
open  the  breach  between  the  trust  companies  and  the  Clear- 
ing House  banks. 

It  was  under  these  conditions  that  several  events 
occurred  which  might  have  invoked  a  new  panic,  but  for 
the  leadership  of  the  same  resolute  figure  which  had  stayed 
the  panic  of  1907.  Early  in  January,  191 1,  a  notice  was 
posted  on  the  doors  of  the  Carnegie  Trust  Company  that 
it  had  been  closed  by  the  State  Banking  Department, 
pending  examination  of  its  condition.  The  record  of  the 
company  had  been  more  or  less  stormy  since  its  foundation. 
Heroic  efforts  by  its  founder,  the  brilliant  and  versatile 
Charles  C.  Dickinson,  had  failed  to  maintain  its  prestige. 
The  spectacular  performances  of  a  former  Secretary  of  the 
Treasury,  under  whose  presidency  large  sums  were  lent  to 


100  PROGRESS  OF  THE   EMPIRE   STATE 

an  irresponsible  promoter,  were  followed  by  the  sale  of  the 
controlling  interest  to  a  group  of  speculators,  some  of  whom 
later  were  convicted  in  the  courts  as  the  result  of  their 
questionable  financial  performances.  Mr.  Dickinson  him- 
self, worn  down  by  the  effort  to  save  the  institution  from 
discredit,  died  suddenly  under  peculiar  circumstances  in  iqio, 
and  the  company  failed  to  recuperate,  even  with  the  aid  of 
deposits  of  city  money  transferred  to  its  custody  by  a  city 
chamberlain,  who  in  his  turn  was  convicted  in  the  courts. 

The  announcement  of  this  disaster,  with  the  impending 
failure  of  two  or  three  minor  companies  which  were  in  close 
relation  with  the  Carnegie  Trust  Company,  brought  a 
gathering  on  the  evening  of  January  8,  191 1,  of  the  financial 
leaders  of  New  York  in  the  library  of  Mr.  J.  P.  Morgan. 
With  memories  of  the  trying  days  of  1907  fresh  in  their 
minds,  there  came  together  on  that  memorable  evening 
such  men  as  Henry  Phipps,  Paul  D.  Cravath,  Otto  H. 
Kahn,  James  G.  Cannon,  Walter  Frew,  A.  Barton  Hepburn, 
and  representatives  of  other  strong  banks  and  banking 
houses.  A  statement  was  given  out  that  the  Madison  Trust 
Company,  which  was  closely  related  to  the  Carnegie,  would 
be  absorbed  by  merger  with  the  Equitable  Trust  Company, 
which  was  under  the  resolute  presidency  of  Mr.  Krech,  and 
that  the  financial  needs  of  the  Nineteenth  Ward  and  the 
Twelfth  Ward  Banks  would  be  provided  for  by  the  firm  of 
J.  P.  Morgan  &  Company. 

The  danger  of  panic  was  thus  stayed,  but  the  financial 
leaders  determined  that  the  time  had  come  to  bring  to  an 
end  the  discord  existing  between  the  Clearing  House  banks 
and  the  trust  companies.  The  controlling  spirits  in  a 
majority  of  the  larger  trust  companies  agreed  to  conform 
to  the  Clearing  House  ruling  requiring  25  per  cent,  cash 
reserves  against  demand  deposits,  and  were  welcomed  back 
to  the  Clearing  House.     Thus  was  brought  to  an  end  a 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK    IOI 

condition  which  had  Hong  been  a  weakness  in  the  New  York 
financial  world,  and  the  leading  banking  institutions  of  the 
city  were  knit  together  as  closely  as  was  practicable  under 
the  American  system  of  isolated  banking  units.  Incidental 
to  the  house-cleaning  which  followed  the  return  of  the  trust 
companies  to  the  Clearing  House  was  the  institution  of  a 
system  of  regular  examinations  of  the  Clearing  House  banks 
by  an  examiner  appointed  by  the  Clearing  House  Committee 
and  under  instructions  to  report  to  them  any  irregularities 
or  reckless  and  irresponsible  banking. 

Gradually,  the  smaller  and  weaker  banks  and  trust 
companies  were  eliminated  by  absorption  with  the  stronger 
ones.  Of  thirty-three  companies  which  were  actively  com- 
peting for  business  in  1902,  twenty  had  been  merged  before 
the  year  1913  with  other  companies  or  had  gone  into  liquid- 
ation. Among  companies  which  thus  disappeared — some 
of  them  institutions  of  large  resources  and  successful 
management — were  the  Atlantic,  Bowling  Green,  Central 
Realty,  Bond  &  Trust,  City,  Colonial,  Continental,  Fifth 
Avenue,  Holland,  Knickerbocker,  McVickar,  Manhattan, 
Mercantile,  Merchants',  Morton,  North  American,  The 
Trust  Company  of  America,  The  Trust  Company  of  the 
Republic,  and  the  Van  Norden.  Some  new  companies  had 
taken  their  places,  so  that  in  Greater  New  York  there  were 
still  in  operation  thirty-four  companies,  of  which  fifteen  were 
in  the  Clearing  House.  The  trust  companies  which  towered 
above  all  others  in  the  magnitude  of  their  resources  were  the 
Bankers'  Trust,  the  Guaranty  Trust,  the  Farmers'  Loan  & 
Trust,  the  Equitable  Trust,  and  the  City  Trust  Company. 

Among  bank  mergers,  one  of  the  most  interesting,  from 
an  historical  point  of  view,  was  the  absorption  in  the  spring 
of  1912  by  the  Hanover  National  of  the  Gallatin  National 
Bank.  While  the  Gallatin  had  become  a  relatively  small  in- 
stitution, it  had  been  founded  by  Albert  Gallatin,  Jefferson's 


102  PROGRESS  OF  THE   EMPIRE   STATE 

great  Secretary  of  the  Treasury — second  only  to  Hamilton 
among  those  who  built  up  and  protected  the  national  credit — 
and  its  charter  dated  back  to  1829.  The  bank  gained  addi- 
tional prestige  in  its  later  career  from  the  presidency  of 
Frederick  D.  Tappen,  who  served  from  1869  until  his  death 
in  1902,  and  took  a  leading  part  in  guiding  the  financial  world 
through  the  panics  of  1873  and  1893. 

Closely  connected  with  the  development  of  American 
banking  relations  in  foreign  countries  has  been  the  expansion 
of  commercial  business  with  Latin  America  and  the  Orient. 
Several  strong  banking  houses  do  business  almost  exclusively 
with  the  Latin-American  countries  and  have  endeavored 
to  aid  merchants  in  those  countries  during  periods  of  dis- 
turbance and  bad  crops  by  extending  long-term  credits. 
This  system  of  credits  has  not  obtained  so  firm  a  footing, 
however,  among  American  exporters  as  among  those  of 
Great  Britain  and  other  European  countries.  In  the  Orient, 
American  enterprise  obtained  an  early  footing.  Even  be- 
fore the  romantic  days  of  Perry's  opening  of  Japan,  the 
house  of  Russell  &  Co.,  in  which  the  Forbes  family  of  Boston 
had  a  share,  was  doing  a  large  Oriental  business.  While 
many  changes  in  methods  and  personnel  have  occurred  in 
half  a  century,  some  of  the  best  traditions  of  the  early 
traffic  are  still  preserved  by  the  China  and  Japan  Trading 
Co.  and  by  the  American  Trading  Co.  Men  like  Silas  D. 
Webb  of  the  former  company  and  James  R.  Morse  of  the 
latter  passed  many  years  in  Eastern  trade  and  brought 
back  their  ripe  experience  for  the  conduct  of  their  business 
in  New  York.  The  beginnings  of  the  China  and  Japan 
Trading  Co.,  of  which  Mr.  Webb  is  president,  lay  in  the 
business  established  in  the  year  1847  under  the  style  of  Fogg 
Brothers  in  Boston,  Mass.,  and  H.  Fogg  &  Co.  in  Shanghai, 
China.  In  1852  the  American  house  was  removed  to  New 
York,  and  in   i860  the  name  of  the  American   firm  was 


HIE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK       103 

changed  to  William  H.  Fogg  &  Co.  Both  the  American 
and  Chinese  houses  were  absorbed  by  the  Trading  Company 
after  its  incorporation  in  1876.  The  business  has,  therefore, 
been  a  continuous  one  since  1847  and  the  company  and  its 
predecessors  have  conducted  business  with  China  under  the 
protection  of  various  treaties  between  the  United  States  and 
the  Chinese  Empire  for  the  encouragement  of  commerce  and 
the  regulation  of  trade.  This  business  has  covered  a  wide 
field,  but  has  been  concerned  largely  with  extending  the 
market  for  American  cotton  goods  in  the  Orient  and  bring- 
ing back  silks  and  tea. 

The  American  Trading  Co.,  of  which  Mr.  Morse  is 
president,  has  a  capital  of  #2,500,000,  and  is  engaged  in  the 
business  of  exporting  American  products  and  manufactures 
of  all  kinds  and  in  importing  into  the  United  States  the 
natural  products  of  the  Oriental  countries.  The  company 
has  expanded  its  relations  to  include  not  only  China  and 
Japan,  but  the  Philippine  Islands,  Cuba,  Venezuela, 
and  other  Latin-American  countries,  and  even  Africa 
and  Australia.  The  exports  made  by  this  company  from 
the  United  States  reach  #20,000,000  per  annum,  without 
counting  the  sub-trade  carried  on  by  the  company's  houses 
in  the  East  and  in  South  America.  The  business  of  the 
American  Trading  Co.  was  first  established  in  1877  and 
absorbed  later  the  large  business  formerly  done  by  Flint, 
Eddy  &  Co.  One  of  its  special  features  is  the  maintenance 
of  a  regular  engineering  department  devoted  to  the  sale  of 
American  machinery. 

Inevitably,  with  the  expansion  of  the  trade  of  the  Empire 
City  of  the  country  came  the  need  for  harbor  improvement 
and  terminal  facilities.  The  rapid  growth  in  length  and 
draft  of  transatlantic  liners  led  to  the  cutting  of  Ambrose 
Channel  and  the  demand  for  larger  piers.  It  became  obvi- 
ous, with  the  close  of  the  nineteenth  century,  that  even  these 


104  PROGRESS  OF  THE    EMPIRE  STATE 

improvements  would  not  meet  the  growing  business  of  the 
city,  if  it  were  attempted  to  handle  it  all  on  Manhattan 
Island.  Out  of  this  realization  developed  a  comprehensive 
new  system  of  handling  both  foreign  and  domestic  freight. 
A  young  man  who  had  inherited  a  great  fortune,  but  who 
preferred  to  render  public  service  to  spending  a  life  of  leisure, 
conceived  the  idea  of  acquiring  the  low-lying  and  apparently 
worthless  flats  of  Brooklyn  for  a  great  freight  terminal, 
which  should  relieve  Manhattan  Island  from  a  large  share 
of  the  freight  handling,  warehousing,  and  distribution  which 
caused  so  much  congestion  along  the  water  front.  Out  of 
the  foresight  of  this  young  man,  Irving  T.  Bush,  grew  the 
Bush  Terminal  Co.,  which  practically  created  a  new  city 
under  the  shadow  of  the  Statue  of  Liberty.  Started  as  a 
private  enterprise  in  1895,  two  large  piers  were  completed 
in  1903,  and  the  subsequent  history  of  the  company  has 
been  one  of  constant  expansion. 

The  Bush  Terminal  plant  occupies  two  hundred  acres 
of  land;  has  seven  modern  extension  piers,  each  nearly  a 
quarter  of  a  mile  long;  has  130  warehouses  and  railway  yards, 
and  trackage  for  two  thousand  freight  cars.  It  possesses  its 
own  locomotives,  tugboats,  car  floats,  lighters,  barges,  and  all 
the  other  equipment  necessary  to  the  movement  of  freight. 
At  these  piers  are  anchored  vessels  from  every  quarter  of 
the  world.  Apart  from  the  big  Atlantic  liners,  run  chiefly 
for  passenger  service,  a  larger  number  of  vessels  with  greater 
tonnage  arrive  from  foreign  ports  at  the  Bush  Terminal 
than  at  all  the  piers  of  the  mainland.  Incoming  freight  is 
loaded  directly  on  the  cars  by  automatic  machinery,  while 
outgoing  freight  is  transferred  from  the  cars  directly  to  the 
vessels  which  are  to  carry  it  to  Europe,  India,  South  Africa, 
Australia,  and  other  remote  parts  of  the  world.  By  the 
system  of  tugs  and  car  floats,  freight  which  is  not  to  be 
consumed  or  distributed  on  Manhattan  Island  no  longer 


THE  BUSH  TERMINAL  PLANT 

This  presents  a  general  view  of  the  scope  of  this  large  freight 
terminal,  with  its  facilities  for  docking  ocean-going  vessels  and 
loading  and  unloading  freight  directly  from  cars  to  vessels  and 
cars  to  warehouse.  The  plant  occupies  two  hundred  acres;  has 
seven  extension  piers,  each  nearly  a  quarter  of  a  mile  long;  one 
hundred  and  thirty  warehouses;  and  railway  yards  and  trackage 
for  two  thousand  freight  cars.  It  possesses  its  own  locomotives, 
tug  boats,  car  floats,  lighters,  barges,  and  automatic  equipment. 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK    105 

congests  the  streets  of  the  city,  but  the  cars  are  taken  from 
the  New  Jersey  and  New  England  terminals  direct  to  the 
Bush  Terminal  plant. 

Even  manufacture  for  export  is  carried  on  in  buildings 
specially  designed  for  this  business,  with  ample  light  and 
air,  and  with  quick  telephone  and  transit  communication 
with  offices  in  New  York.  The  radical  reconstruction  of 
New  England  railway  connections,  bringing  traffic  across 
Long  Island  Sound  directly  to  the  Bush  Terminal,  is  another 
measure  which  has  relieved  the  congested  streets  and  rail- 
way terminals  of  Manhattan.  Ultimately,  as  the  enter- 
prise grew  in  magnitude,  Mr.  Bush  transformed  his  private 
venture  into  a  stock  company,  whose  securities  stand  high 
in  the  market.  The  capital  stock  of  the  Bush  Terminal  Co. 
is  #5,300,000  actually  issued,  while  bonds  are  outstanding 
to  the  amount  of  a  little  less  than  #10,000,000.  The  total 
assets  on  July  31,  1912,  were  #18,768,433.  So  essentially 
is  the  enterprise  a  part  of  the  necessary  equipment  of 
modern  New  York  that  negotiations  have  been  going  on  for 
the  acquisition  of  the  great  plant  by  the  city. 

Modern  means  of  communication  are  an  important 
factor  in  the  mechanism  of  New  York  business  transactions. 
The  volume  of  business  which  is  now  done,  both  on  the 
Stock  Exchange  and  in  the  offices  of  captains  of  finance, 
would  have  been  impossible  before  the  development  of  the 
ocean  cable,  the  telegraph,  and  the  telephone.  While 
American  stocks  were  the  subject  of  speculation  in  London 
even  before  the  development  of  railways,  and  the  bonds  of 
the  Camden  &  Amboy  Railroad  were  listed  there  as  early 
as  1838,  it  was  only  with  the  installation  of  the  cable  in  1866 
that  it  became  possible  to  keep  quotations  approximately 
level  in  both  markets.  The  outbreak  of  the  Civil  War 
found  New  York  separated  by  about  two  weeks  from  London 
and  by  a  still  greater  time  from  other  foreign  markets.     It 


106  PROGRESS  OF  THE   EMPIRE   STATE 

was  said  that  New  York  brokers  were  paying  as  much  as 
$1,000,000  per  year  for  London  dispatches  with  the  instal- 
lation of  the  first  working  cable  in  1866.  Twenty  words 
to  London  then  cost  $100,  as  compared  with  #5  to-day.  At 
present  it  is  the  estimate  of  cable  officials  that  fully  ninety- 
five  per  cent,  of  all  messages  sent  are  in  code  and  that  one 
thousand  messages  come  from  the  financial  district  daily. 

On  land  the  electric  telegraph  has  contributed  its  share 
in  bringing  together  the  markets  of  the  world.  The  system 
of  stock  tickers,  now  installed  in  nearly  all  the  brokerage 
offices  and  in  leading  hotels  and  other  places  where  men 
gather  to  discuss  prices,  has  made  the  news  of  transactions 
on  the  Stock  Exchange  as  nearly  instantaneous  as  the 
advance  of  present-day  science  permits.  In  addition  to 
Stock  Exchange  quotations,  which  are  carried  to  nearly  two 
thousand  tickers  in  Greater  New  York  and  Jersey  City, 
there  are  one  hundred  machines  reporting  the  grain  and 
produce  quotations,  and  there  are  additional  hundreds  in 
Chicago  and  other  leading  cities  of  the  country.  Many 
brokers  lease  wires  to  connect  their  Wall  Street  offices 
with  branches  in  other  parts  of  the  city  and  country,  pay- 
ing large  sums  for  this  service. 

The  telephone  has  doubled  and  perhaps  trebled  the 
working  efficiency  of  all  those  classes  of  men  who  decide 
important  questions  by  a  word  and  leave  the  details  to  their 
subordinates.  Mr.  Morgan,  or  Mr.  Ryan,  sitting  in  his 
office,  was  able  to  direct  his  secretary  to  get  in  communication 
with  any  other  financial  leader  and  perhaps  in  a  talk  of  two 
minutes  decide  what,  before  the  invention  of  the  telephone, 
would  have  required  a  special  visit  or  a  long  exchange  of 
letters.  On  the  Stock  Exchange  alone  business  aggregating 
over  $100,000,000  per  day  is  transacted  by  telephone.  In 
the  last  analysis  some  of  the  great  fortunes  which  have 
been  accumulated  during  the  closing  years  of  the  nineteenth 


THE  FINANCIAL  DEVELOPMENT  OF  NEW  YORK    107 

century  and  the  opening  years  of  the  twentieth  century  have 
probably  been  augmented — perhaps  in  some  cases  actually 
made  possible — by  the  quickness  of  communication  and  the 
ability  to  do  a  great  deal  in  a  short  space  of  time  which  the 
telephone  service  affords. 

An  auxiliary  part  of  the  mechanism  of  exchange  is  the 
news  bureaus,  which  issue  every  few  minutes,  for  distri- 
bution in  banking  and  brokerage  offices,  printed  slips  contain 
ing  the  latest  news  from  all  over  the  world  which  is  likely 
to  affect  in  any  way  market  conditions,  to  stimulate  confi- 
dence or  to  arouse  anxiety.  Not  stock  quotations  alone  or 
quotations  on  the  produce  and  cotton  exchanges  appear  on 
these  slips,  but  reports  about  the  crops,  railway  gross  and 
net  earnings,  increases  or  suspension  of  dividends,  anticipa- 
tions of  Treasury  reports  and  presidential  addresses,  and 
even  happenings  in  foreign  cabinets  and  financial  markets. 


JAMES  GRAHAM  CANNON 

v.,  185* 
q;  educat 

schools;    married    in    New    York    City,    Charlotte    B.    Bradley 
Engag  inking  in  New  York  City  from  1 

dent  Fourth  National  Bank  of  New  York  until  1910;  president 
V"-ust  ■  '  '  < «  Agricultural  Credit  Co.  of  New  York- 

Land  Co.,  Hankers1  Trust  (  :luc  Bank' 

United  States  Mortgage  &  Trusl 
Co.,  Transatlantic  Trust  Co.,  Standard' 
M.llmg  Co.;  trustee  Associated  Simmons  Hardware  Companies 
Franklin  Savings  Bank,  United  States  Casualty  Co.,  and 

y;  chairman  of  the  executive  committee  of  the 
York  Chamber  of  Commerce;  president  board  of  tru 
Hahnemann  Hospital;  member  International  Commitl 
(  .  A.  ;  vice-president  and  director  Packard  Commercial  & 
treasurer  and  director  Woodlawn  Cemetery. 


CHAPTER  IV 

NEW  YORK  AND  THE  NATIONAL  FINANCES 

BY  JAMES  G.   CANNON 

THE  connection  of  New  York  with  the  finances  of  the 
government  has  been  long  and  intimate,  as  the 
natural  result  of  the  concentration  of  financial 
operations  in  the  metropolis.  The  first  name  which  suggests 
itself  almost  inevitably  as  representing  the  participation  of 
New  York  in  national  finance  is  that  of  Alexander  Hamilton. 
Although  Hamilton  was  not  a  born  New  Yorker,  his  arrival 
in  the  city  as  a  youth  to  make  his  fortune,  and  his  marriage 
at  the  age  of  twenty-four  to  Miss  Elizabeth  Schuyler, 
daughter  of  General  Philip  Schuyler,  identified  his  career 
with  the  Empire  State.  As  early  as  1781  Hamilton  was 
suggested  to  Washington  by  John  Sullivan  for  head  of  the 
Treasury  Department,  which  had  just  been  created  by  the 
Continental  Congress.  Washington  replied  that  "few  of 
his  age  have  a  more  general  knowledge,  and  no  one  is  more 
firmly  engaged  in  the  cause,  or  exceeds  him  in  probity  and 
sterling  virtue."  Robert  Morris,  an  older  man,  obtained 
the  place  at  the  time,  but  Hamilton  opened  a  correspond- 
ence with  him  which  showed  much  constructive  ability 
and  established  a  warm  friendship  between  the  older  and 
the  younger  man. 

The    brilliant    career   of   Hamilton    in    organizing    the 
finances  of  the  young  nation  when  he  became  the  first 

Secretary  of  the  Treasury  under  Washington,  belongs  to 

109 


HO  PROGRESS  OF  THE   EMPIRE   STATE 

the  history  of  the  Union  as  much  as  to  that  of  the  Empire 
State.  When  Hamilton  assumed  this  position,  after  his 
brilliant  fight  to  persuade  New  York  to  ratify  the  Consti- 
tution of  1789,  he  was  only  thirty-two  years  of  age.  It  was 
not  the  ordinary  functions  of  a  Minister  of  Finance  to  which 
he  was  called.  The  whole  work  of  organizing  a  department, 
establishing  the  national  credit,  creating  a  national  bank, 
providing  a  coinage  system,  framing  a  scheme  of  taxation, 
and  unsnarling  the  financial  tangles  left  by  the  Revolution, 
lay  before  him.  To  describe  this  work  in  detail  would  go 
beyond  the  limits  of  this  sketch.  It  was  not  until  September 
2,  1789,  five  months  after  the  inauguration  of  Washington, 
that  the  Act  was  passed  establishing  the  Treasury  Depart- 
ment. Washington  at  once  sent  in  the  name  of  Hamilton 
for  Secretary  of  the  new  Department,  and  ten  days  after 
his  appointment  Congress  requested  him  to  prepare  a  report 
on  the  public  credit.  Then  came  calls  for  reports  on  the 
collection  and  management  of  the  revenue,  estimates  of 
receipts  and  expenditures,  the  regulation  of  the  currency, 
the  mint,  the  post-office,  the  navigation  laws,  and  the  public 
lands. 

When  Congress  met  in  January,  1790,  Hamilton  sub- 
mitted his  report  on  public  credit,  which  has  long  stood  out 
as  one  of  the  master  state  papers  of  American  history. 
Read  in  the  light  of  the  economic  progress  of  more  than  a 
century,  its  conclusions  still  bear  analysis  as  being  far  in 
advance  of  his  time  and  in  the  main  sound  and  clear.  In 
1790  political  economy  as  a  science  had  hardly  been  born, 
and  the  work  of  Adam  Smith,  although  about  fourteen 
years  old,  was  probably  known  to  but  few  in  America. 
Hamilton  in  his  report  gathered  up  the  scattered  threads 
of  the  disordered  finances  of  the  Continental  Congress  and 
of  the  States  and  showed  how  they  could  be  woven  into  a 
band  of  strength  and  symmetry,  holding  together  by  the 


NEW  YORK  AND  NATIONAL  FINANCE  ill 

motive  of  enlightened  self-interest  all  parts  of  the  new 
Union. 

Hamilton  recommended  planting  the  public  credit 
upon  firm  foundations  by  resolutely  assuming  not  only  the 
obligations  of  the  Continental  Congress,  but  also  assuming 
the  debts  of  the  several  States  incurred  for  the  purposes  of 
the  war.  The  latter  step  tended  to  equalize  the  burdens 
which  had  been  assumed  generously  and  in  large  measure 
by  some  of  the  States,  and  reluctantly  and  in  small  measure 
by  others,  but  Hamilton  insisted  that  the  war  debt  was  a 
national  obligation,  and  that  so  far  as  it  affected  the  people 
of  the  Union,  no  greater  revenues  would  be  required  if  the 
provision  was  made  for  it  wholly  by  the  United  States  or 
partly  by  the  States  separately.  He  pointed  out  that  the 
control  of  the  entire  matter  by  the  Federal  Government 
would  secure  uniformity  of  treatment  for  public  creditors 
and  would  prevent  competition  between  the  Union  and  the 
States  for  sources  of  revenue. 

Hamilton  found  the  public  debt  to  be  #54,124,464.56. 
This  included  the  foreign  debt,  amounting  to  #10,070,307, 
with  arrears  of  interest  amounting  to  #1,640,071.62;  the 
domestic  debt  of  #27,383,917.74,  with  arrears  of  interest 
amounting  to  #13,030,168.20  and  the  unliquidated  debt  of 
about  #2,000,000.  The  amount  of  the  State  debts  he 
estimated  at  #25,000,000,  making  the  total  amount  to  be 
dealt  with  something  more  than  #75,000,000.' 

The  effect  of  Hamilton's  report  was  so  stimulating  to 
the  public  credit  that  it  led  to  serious  complaints  that 
speculators,  as  soon  as  they  knew  its  contents,  had  seized 
the  occasion  to  buy  out  at  low  figures  all  the  outstanding 
certificates  of  the  debt  which  they  could  obtain.  The 
entire  funding  project  was  approved  in  committee,  but  when 
it  was  taken  up  in  the  House  on  March  29,  1790,  the  opposi- 

1  Vide  Conant's  Alexander  Hamilton,  ch.  iii.,  Houghton  Mifflin  &  Co.,  Boston. 


112  PROGRESS  OF  THE   EMPIRE  STATE 

tion  was  swelled  by  the  arrival  of  the  members  from  North 
Carolina,  which  had  just  entered  the  Union.  They  suc- 
ceeded in  recommitting  the  project  for  the  assumption  of 
the  State  debts.  It  was  after  the  final  vote  against  the 
funding  project  on  April  12th,  when  it  was  rejected  by  a  vote 
of  31  to  39,  that  the  famous  arrangement  was  made  be- 
tween Hamilton  and  Jefferson  by  which  the  national  capital 
was  fixed  at  Washington  in  return  for  Southern  votes  for  the 
funding  project.  The  next  session  of  Congress  witnessed 
the  presentation  by  Hamilton  of  his  report  in  favor  of  the 
first  United  States  Bank,  with  a  capital  of  #10,000,000, 
which  became  law  on  February  25,  1791.  The  bill  was 
passed  only  after  resolute  resistance  by  the  strict  construc- 
tionists of  the  Constitution,  of  whom  Jefferson  was  the  head. 
Even  after  its  passage  by  the  two  Houses,  the  Cabinet 
divided  on  the  question,  and  each  member  submitted  his 
opinion  to  Washington  in  writing  before  he  affixed  his 
signature. 

It  was  to  New  York  that  Hamilton,  after  his  distin- 
guished services  for  his  country,  came  back  to  build  a  home, 
to  rear  his  children,  and  to  practice  his  profession.  It  is 
somewhat  difficult  to  realize  that  the  site  he  selected  for  a 
home,  far  from  the  city's  madding  crowds,  is  now  part  of  a 
closely-built  section  which  extends  several  miles  farther 
north.  At  that  time  stage-coaches  ran  but  three  days  in 
the  week  to  the  point  which  now  corresponds  to  Forty- 
second  Street  and  Broadway.  Hamilton,  after  some  search, 
found  a  tract  to  his  liking  in  the  neighborhood  now  bounded 
by  St.  Nicholas  Avenue  and  Tenth  Avenue  and  extending 
from  141st  to  145th  Streets.  The  whole  of  this  area  and 
more,  extending  on  the  west  to  the  Hudson  River,  was 
acquired  in  one  piece.  The  Albany  and  Bloomingdale 
Road,  which  has  long  since  disappeared,  passed  diagonally 
through  it,  dividing  the  part  on  which  the  house  stood  from 


NEW  VORK  AND  NATIONAL  FINANCE  113 

the  farm  on  the  easterly  side.  It  is  interesting  to  read  the 
brief,  business-like  letter  to  Ebenezer  Stevens,  a  prosperous 
merchant  who  had  a  country  place  in  the  vicinity,  in  which 
Hamilton  stated  the  terms  he  was  willing  to  offer  for  the 
property1: 

"25th  of  October,  1799. 

"If  the  owner  of  the  ground  adjoining  you  will  take 
Eight  Hundred  pounds  (£800)  for  sixteen  acres  including 
a  parcel  of  the  woodland,  and  lying  on  the  water  the  whole 
breadth,  you  will  oblige  me  by  concluding  the  bargain  with 
him,  and  I  will  pay  the  money  as  soon  as  a  good  title  shall 
appear.  If  he  will  not  sell  a  part  at  this  rate,  I  request  you 
to  ascertain  whether  he  will  take  Thirty  pounds  an  acre  for 
the  whole  tract  and  let  me  know. 

"If  I  like  it,  after  another  view  of  the  premises,  I  shall 
probably  take  the  whole  at  this  price.  But  I  can  only  pay 
one-half  down,  a  quarter  in  six  months  and  the  remaining 
quarter  in  a  twelve  month.  He  shall  be  satisfied  on  the 
score  of  security  if  he  desires. 

"Yrs  with  regard, 

"A.  Hamilton." 

It  was  from  this  home  that  Hamilton  went  forth  on  the 
fateful  morning  of  Wednesday,  July  11,  1804,  to  the  duel 
with  Aaron  Burr;  but  his  death  occurred,  after  he  was 
brought  back  across  the  river,  in  the  city  house  of  his  friend 
William  Bayard,  situated  at  82  Jane  Street,  which  has  long 
since  disappeared. 

It  was  the  first  President  from  New  York,  Van  Buren, 
who  contributed  somewhat  perhaps  to  the  financial  suprem- 
acy of  the  city  by  securing  the  adoption  of  the  sub- 
Treasury  system  of  dealing  with  the  public  funds.     The 

1  This  letter  and  the  essential  facts  are  taken  from  Dr.  Allan  McLane  Hamilton's 
Intimate  Life  of  Alexander  Hamilton,  Scribners,  1910,  pp.  336-339. 

8 


114  PROGRESS  OF  THE   EMPIRE  STATE 

contest  between  Jackson  and  the  second  Bank  of  the  United 
States  was  followed  by  the  panic  of  1837,  which  left  the 
business  and  finances  of  the  country  in  such  a  heap  of  ruins 
that  an  extra  session  of  Congress  was  called  by  Van  Buren 
to  deal  with  the  situation.  In  a  long  special  message  of 
September  4,  1837,  he  pointed  out  that  it  was  not  possible 
to  carry  out  the  authority  given  by  Congress  in  the  preced- 
ing year, — to  discontinue  the  use  of  such  banks  as  deposi- 
tories as  should  at  any  time  refuse  to  redeem  their  notes  in 
specie,  and  to  substitute  other  banks. 

The  general  and  almost  simultaneous  suspension  of 
specie  payments,  Van  Buren  declared,  "rendered  the  per- 
formance of  this  duty  imperative  in  respect  to  those  which 
had  been  selected  under  the  act,  and  made  it  at  the  same 
time  impracticable  to  employ  the  requisite  number  of  others 
upon  the  prescribed  conditions."  The  Treasury  was  still 
further  embarrassed  by  another  provision  of  law,  providing 
that  it  should  satisfy  all  demands  in  specie  or  its  equiva- 
lent, and  prohibiting  the  offer  of  any  bank  note  not  con- 
vertible on  the  spot  into  gold  or  silver  at  the  will  of  the 
holder.  To  remedy  these  conditions  Van  Buren  recom- 
mended that  the  government  should  create  an  independent 
Treasury  to  take  care  of  its  own  funds,  and  that  it  should 
collect  its  own  revenue  and  make  its  own  disbursements. 
A  bill  was  introduced  into  the  Senate  on  September  14,  1837, 
which  after  being  considerably  amended  became  law  on 
July  4,  1840.  The  sweeping  victory  of  the  Whigs  in  the 
next  elections  caused  the  repeal  of  the  independent  Treas- 
ury law  August  13,  1 841,  and  it  is  probable  that  if  President 
William  Henry  Harrison  had  lived,  a  third  United  States 
Bank  would  have  been  established.1 

The  Democrats  were  again  returned  to  power  in  1844 
and  a  new  measure  for  creating  the  independent  Treasury 

1  Dewey,  Financial  History  of  the  United  Slates,  New  York,  1903,  p.  240. 


A.  BARTON  HEPBURN 

Hanker;   chairman  of    I  rial   Hank,  New 

York  City;  born  in  Colton,  X.  Y.,  July  24,  [846;  son  Zina  Earle 
and  Beulah  (Gray)  Hepburn;   A.B.  M  [871; 

(LL.D  D.C.L.  University,  1906;    LL.D. 

Colun  m;  LL.D.  Will  ge,  1911;  mar- 

[attie  A.  Fishi  1  to,  1873;  2d, 

Emily  L.  Eaton  of  Montpelier,  Vt.,  July  14,  1887.  Was  instruc- 
tor mathematics,  St.  Lawrence  Academy;  principal  Ogdenslmrg 

itional  Institute;  practis  Colton,  N.  Y.;  member 

New   York   Asseml  superintendent  of  Banking 

itment,  State  of  New  York,  1 880-1 883;  United  States 
Bank  Examiner  for  Xew  York,  1 888-1 892;  Comptroller  of  the 
Currency,  1892-1893;  president  Third  Xational  Bank,  New  York, 
1893-1897;  vice-president  Xational  City  Bank,  New  York, 
1897-1899;  president  Chase  National  Bank,  New  York,  1899- 
191 1.  Director,  Chase  National  Bank,  Bankers'  Trust  Co., 
Columbia-Knickerbocker  Trust  Co.,  First  National  Bank,  First 
Security  Co.,  Maryland  Trust  Co.  (Baltimore),  New  York  Life 
Insurance  Co.,  and  other  corporations.  Author,  History  of 
Coinage  and  Currency,  and  Artificial  1!  and  Commercial 

Development.  Member  New  York  Chamber  of  Commerce,  New 
England  Society  (president),  St.  Andrew  Society,  and  others; 
officer  Legion  of  Honor,  France,  1912;  chairman  Currency  Com- 
mission, American  Bankers'  Association,  since  its  creation,  1906. 


NEW  YORK  AND  NATIONAL  FINANCE  1 15 

was  enacted  in  August,  1846,  in  almost  the  same  terms  as 
in  the  act  of  1840.  Treasury  notes,  however,  were  added 
to  gold  and  silver  among  the  classes  of  currency  receivable 
for  public  dues.  Provision  was  made  for  vaults  and  safes 
in  the  Treasury  Building  at  Washington,  at  the  mints,  and 
at  the  custom  houses.  The  principal  centers  of  deposit 
were  to  be  New  York,  Philadelphia,  Washington,  Charles- 
town,  New  Orleans,  and  St.  Louis.  The  new  system  natu- 
rally began  its  career  with  the  opposition  of  the  banks,  and 
inadequate  provision  for  the  care  of  funds  of  disbursing 
officers  scattered  throughout  the  country  led  to  abuses  in 
the  loaning  of  public  money  by  these  officers  for  their  own 
profit.  These  evils  were  partially  remedied  by  increasing 
the  number  of  depositories  and  by  giving  authority  to 
disbursing  officers  to  make  payments  by  Treasury  drafts. 
The  system  was  a  natural  consequence  of  the  uncertainty 
and  abuses  of  ill-regulated  banking,  and  while  serving  a 
useful  purpose  in  guarding  against  these  evils,  led  to 
arbitrary  changes  in  the  stock  of  money  in  circulation,  which 
have  imposed  unusual  obligations  and  functions  upon  nearly 
every  succeeding  Secretary  of  the  Treasury,  especially  in 
times  of  panic. 

In  the  absence  of  adequate  revenue  and  of  friendly 
cooperation  with  the  banks,  Treasury  management  was 
not  brilliant  in  the  years  immediately  preceding  the  Civil 
War.  The  result  of  the  elections  in  the  autumn  of  i860  gave 
a  severe  shock  to  credit,  both  public  and  private;  Southern 
banks  withdrew  their  balances  in  the  North;  and  loans  were 
contracted.  President  Buchanan  obtained  authority  by 
the  act  of  December  17,  i860,  to  sell  Treasury  notes  at  such 
rates  of  interest  as  might  be  offered  by  responsible  bidders, 
and  was  compelled  on  a  large  part  to  pay  from  10  to  12  per 
cent.  With  the  beginning  of  the  year  1861,  although  seces- 
sion was  becoming  an  accomplished  fact,  the  appointment  of 


u6 


PROGRESS  OF  THE   EMPIRE   STATE 


a  New  York  man,  John  A.  Dix,  as  Secretary  of  the  Treasury, 
with  other  changes  in  the  Cabinet,  tended  to  restore  some 
degree  of  public  confidence,  and  resulted  in  more  resolute 
measures  to  stem  the  tide  of  financial  demands  which  set 
in  with  the  outbreak  of  civil  war.1 

Upon  the  bankers  of  New  York  fell  most  of  the  burden 
of  providing  funds  for  carrying  on  the  war.  Had  their 
advice  been  followed  from  the  outset,  a  very  different  system 
of  finance  would  have  been  pursued  from  that  adopted  by 
Secretary  Chase.  When  the  Secretary  stubbornly  refused, 
however,  to  accept  their  views,  the  bankers,  although  they 
foresaw  suspension  of  specie  payments  and  the  decline  of 
public  credit,  patriotically  provided  the  funds  as  rapidly 
as  possible  under  the  policy  which  Mr.  Chase  laid  down. 

When  the  war  broke  out,  notes  of  State  banks  formed  a 
large  part  of  the  circulating  medium,  but  they  were  not 
accepted  in  payments  to  the  government,  and  the  aid  of 
the  bankers  was  not  sought  in  making  transfers,  in  keeping 
public  funds,  or  in  placing  loans.  This,  at  least,  was  the 
theory  of  the  independent  Treasury,  although,  in  fact,  the 
absence  of  adequate  depositories  still  led  many  officers  to 
deposit  their  funds  temporarily  in  the  banks  at  theirown  risk. 

The  government  was  compelled  almost  at  the  outset  to 
abandon  the  idea  that  it  could  do  without  the  help  of  the 
banks.  It  was  obvious  that  the  system  of  placing  small 
loans  by  public  subscription,  which  had  been  employed 
during  the  administration  of  President  Buchanan,  could  not 
be  relied  upon  for  obtaining  great  sums  quickly.  They 
could  be  obtained  only  from  the  banks,  which  in  the  nature 
of  things  had  the  keeping  of  the  transferable  capital  of  the 
country.  Secretary  Chase  held  a  conference  in  New  York 
on  August  9,  1861,  with  representative  bankers  of  New 
York,  Philadelphia,  and  Boston.     They  agreed  to  advance 

1  Dewey,  Financial  History  of  the  United  Slates,  New  York,  1903,  p.  272. 


NEW  YORK  AND  NATIONAL  FINANCE  1 17 

to  the  Government  #150,000,000  in  gold,  to  be  secured  by 
three-year  notes  bearing  interest  at  7.30  per  cent.,  to  be 
reimbursed  as  the  proceeds  of  the  sale  of  bonds  were  covered 
into  the  Treasury.  This  union  of  the  banks  of  what  were 
then  the  three  chief  cities  of  the  country  in  support  of  the 
public  credit  was  one  of  the  most  important  events  of  the 
war  and  committed  the  conservative  business  element  con- 
clusively to  the  side  of  the  Union  and  the  policy  of  coercion 
of  the  seceded  States.  Had  the  bankers  of  the  North  been 
niggardly  or  reluctant  in  aiding  the  government,  the  prob- 
lem of  President  Lincoln  in  dealing  with  the  seceded  States 
would  have  been  even  more  difficult  than  it  proved  in  fact. 
The  banks  of  the  three  big  Eastern  cities  had  an  aggre- 
gate capital  of  $120,000,000,  a  circulation  of  $16,964,749, 
deposits  of  $125,617,207,  and  coin  reserves  of  $63,165,039, 
the  latter  being  equal  to  45  per  cent,  of  demand  liabili- 
ties. They  had  already  made  an  agreement  in  November, 
i860,  when  secession  compelled  them  to  contract  their 
business  and  prepare  for  a  period  of  stress,  for  issuing 
clearing-house  certificates  and  making  the  specie  of  all  the 
banks  available  as  a  common  fund. 

Congress  passed  an  act  on  August  5,  1861,  relaxing  the 
provisions  of  the  sub-Treasury  law  so  far  as  to  permit  the 
Secretary  of  the  Treasury  to  deposit  any  money  obtained 
from  loans  in  such  solvent  specie-paying  banks  as  he  might 
select.  The  banks  accepted  this  law  as  authority  for  the 
employment  by  the  Treasury  in  its  transactions  of  the 
ordinary  means  of  commercial  exchange  bank  notes, 
checks,  and  drafts.  They  recommended  to  the  Secretary, 
therefore,  that  he  should  make  use  of  the  proceeds  of  the 
advances  made  by  the  banks  by  drawing  checks  and  drafts 
upon  the  banks  in  favor  of  public  creditors.  They  sug- 
gested that  this  would  not  only  prove  of  great  practical 
convenience,  but  would  diminish  the  uneasiness  and  con- 


Il8  PROGRESS  OF  THE   EMPIRE  STATE 

sequent  hoarding  which  would  take  place  if  the  banks 
reduced  their  reserves  by  paying  out  their  coin.  Secretary 
Chase,  to  the  surprise  of  nearly  every  financier,  declared 
that  the  act  of  August  5th  had  no  such  meaning  or  intent 
and  that  he  should  require  payment  of  the  advances  by  the 
banks  in  coin.  The  subject  was  warmly  discussed  between 
the  Secretary  and  the  bankers,  but  the  Secretary's  position 
was  unshaken  and  the  banks  yielded  rather  than  break  off 
negotiations  so  important  to  the  maintenance  of  the  public 
credit. 

The  bankers  of  New  York  objected  earnestly  to  the 
issue  of  the  new  Treasury  notes  to  circulate  as  money. 
They  succeeded  in  persuading  Mr.  Chase  to  delay  the  issue 
for  a  time,  but  the  Secretary  did  not  long  respect  his 
assurances.  The  banks,  faithful  to  their  pledges,  had  begun 
to  pay  coin  into  the  sub-Treasury  at  the  rate  of  about 
#5,000,000  in  every  six  days.  This  coin  was  disbursed  by 
public  officers,  and  through  the  channels  of  circulation  found 
its  way  at  first  back  into  the  banks,  so  that  their  specie  had 
not  been  materially  reduced  after  the  payment  of  the  second 
installment.  If  the  Treasury  notes  had  not  been  forced 
into  circulation,  this  process  of  paying  coin  upon  loans  to 
the  Government  and  receiving  it  back,  when  disbursed, 
through  the  deposits  of  contractors  and  others,  might  have 
gone  on  continuously  and,  with  the  assistance  of  the  banks 
in  the  distribution  of  loans,  the  country  might  not  have 
been  driven  to  the  suspension  of  specie  payments. 

But  the  issue  of  the  Treasury  notes  shook  confidence  in 
the  future  of  the  currency,  and  after  the  banks  had  informed 
Secretary  Chase  that  they  could  not  receive  the  notes  at 
par  with  coin,  it  was  decided  to  suspend  specie  payments. 
The  date  of  suspension  was  Monday,  December  31,  1861. 
The  managers  of  the  associated  banks  of  the  East  believed 
that  this  suspension  would  not  have  been  necessary  but 


NEW  YORK  AND  NATIONAL  FINANCE  119 

for  the  infusion  into  circulation  of  government  paper  which 
the  Treasury  had  no  means  of  redeeming  in  gold.  The 
hankers  pointed  out  that  transactions  to  the  amount  of 
#3,000,000  were  settled  daily  in  New  York  through  the 
Clearing  House,  without  coin  or  even  hank  notes,  and  that 
the  settlement  of  an  additional  #1,000,000  or  #2,000,000 
per  day  for  the  government  could  be  easily  effected  by  the 
same  machinery. 

In  the  matter  of  taxation  as  well  as  currency  the  bankers 
of  New  York  were  more  far-sighted  than  the  Secretary  of  the 
Treasury.  The  latter  attempted  to  rely  too  much  upon  loans 
and  too  little  upon  the  willingness  of  the  country  to  bear 
increased  taxation.  At  the  special  session  of  Congress  in 
the  summer  of  1861,  the  recommendation  of  Mr.  Chase  was 
to  raise  only  #80,000,000  by  taxation  and  #240,000,000  by 
loans.  Of  the  amount  raised  by  taxation  #65,000,000  was 
required  for  the  ordinary  expenses  of  the  peace  establish- 
ment and  #9,000,000  for  interest  on  the  new  debt.  Several 
important  bodies  in  the  beginning  of  1862  protested  against 
restricting  taxation  within  such  narrow  limits.  When  the 
House  of  Representatives  passed  a  resolution  on  January 
15,  1862,  with  only  five  dissenting  votes,  declaring  in  favor 
of  an  annual  revenue  of  #150,000,000,  its  favorable  influence 
was  reflected  in  the  advance  of  six  per  cent,  bonds  from  90 
to  107.  The  New  York  Chamber  of  Commerce  on  April 
24,  1862,  adopted  a  memorial  to  Congress  declaring  that 
"the  masses  of  the  people  are  ready  and  desirous  to  con- 
tribute their  quota  to  the  ordinary  and  extraordinary 
revenues  of  the  country"  and  that  conditions  demanded  an 
annual  revenue  of  at  least  #250,000,000. 

These  monitions  of  sound  finance  went  unheeded,  and 
upon  a  representative  in  Congress  from  the  State  of  New- 
York,  the  Hon.  Elbridge  G.  Spaulding  of  Buffalo,  was 
finally  forced,   by  the  irony  of  fate,  the  desperate  expe- 


120  PROGRESS  OF  THE   EMPIRE  STATE 

dient  of  the  creation  of  the  greenback.  The  idea  of  issuing 
government  paper  to  carry  on  the  war  had  already  been 
partially  sanctioned  by  the  issue  of  the  demand  notes, 
which  contributed  to  the  suspension  of  specie  payments. 
It  was  suggested  by  Secretary  Chase,  in  his  report  to  Con- 
gress on  December  9,  1861,  that  the  issue  of  these  notes 
might  be  extended  to  an  amount  equal  to  the  average 
circulation  of  the  country,  and  that  the  notes  of  the  State 
banks  might  be  forced  out  of  circulation  by  a  moderate  tax. 
The  Secretary  strongly  preferred,  however,  the  system  of 
substituting  bank  notes  based  upon  bonds  for  the  direct 
issue  of  paper  currency  by  the  government. 

Events  moved  too  fast,  and  the  necessities  of  the  govern- 
ment were  too  urgent  to  await  the  enactment  and  execution 
of  a  plan  for  bringing  the  banks  of  the  country  promptly 
into  a  new  bank-note  system.  In  the  House  of  Representa- 
tives the  chairmanship  of  the  Committee  onWays  and  Means 
was  held  by  Thaddeus  Stevens,  but  Mr.  Spaulding  was 
chairman  of  a  sub-committee  on  the  national  currency  bill 
and  other  means  for  carrying  on  the  war.  With  him  were 
associated  Samuel  Hooper  of  Massachusetts  and  Erastus 
Corning  of  New  York.  This  sub-committee  proceeded 
promptly  to  consider  the  report  of  Secretary  Chase  with  a 
view  to  determining  the  best  measure  for  meeting  existing 
requirements.  The  Secretary  was  not  yet  ready  to  recom- 
mend the  issue  of  legal-tender  government  paper.  After 
resuming  the  arguments  for  and  against  such  an  issue,  he 
said  in  his  annual  report: 

"The  hazard  of  panics,  precipitating  demands  for  coin, 
concentrated  on  a  few  points  and  a  single  fund ;  the  risk  of 
a  depreciated,  and  depreciating,  and  finally  worthless  paper 
money;  the  immeasurable  evils  of  dishonored  public  faith 
and  national  bankruptcy:  all  these  are  possible  conse- 
quences of  the  adoption  of  a  system  of  government  circula- 


NEW  YORK  AND  NATIONAL  FINANCE  121 

tion.  It  may  be  said,  and  perhaps  truly,  that  they  are  less 
deplorable  than  those  of  an  irredeemable  bank  circulation. 
Without  entering  into  that  comparison,  the  Secretary  con- 
tents himself  with  observingthat,in  hisjudgment,  those  possi- 
ble disasters  so  far  outweigh  the  probable  benefits  of  the  plan, 
that  he  feels  himself  compelled  to  forebear  recommending 
its  adoption." 

In  accordance  with  these  views,  Mr.  Spaulding  set  about 
the  preparation  of  a  currency  bill  which  was  to  permit  the 
State  banks  to  issue  notes  secured  by  government  bonds. 
On  December  24th  he  wrote  a  letter  to  Mr.  Corning,  his 
New  York  associate,  who  was  then  at  Albany,  requesting 
him  to  forward  a  copy  of  the  New  York  Free  Banking  Law 
of  1838,  for  the  use  of  the  committee.  Mr.  Corning  com- 
plied with  this  request,  but  expressed  his  own  opinion  in 
the  sentence,  "  This  matter,  as  recommended  by  Secretary 
Chase,  will  not,  in  my  judgment,  meet  the  approval  of  our 
State;  hence  I  think  much  care  should  be  had  in  drawing 
up  the  bill."1 

Mr.  Hooper  rendered  assistance  in  perfecting  the  bill, 
which  was  completed  soon  after  Christmas.  Mr.  Spaulding 
had  come  to  the  conclusion,  however,  that  it  could  not  be 
passed  and  made  available  quickly  enough  to  meet  the 
needs  of  the  government.  He  therefore  drafted  a  section 
providing  for  the  issue  of  legal-tender  Treasury  notes,  which 
he  intended  at  first  to  make  a  section  of  the  bank  bill. 
This  he  introduced  as  a  separate  measure,  in  the  following 
terms: 

"That  for  temporary  purposes,  and  until  the  circulating 
notes  authorized  by  this  act  shall  be  issued  and  put  in 
circulation  by  corporations  and  associations  to  the  aggregate 
amount  of  #i(X),ooo,ooo,  the  Secretary  of  the  Treasury  be, 

1  Spaulding,  History  of  the  Legal  Tender  Paper  Money  Issued  during  the  Rebellion, 
p.  12. 


122  PROGRESS  OF  THE   EMPIRE   STATE 

and  he  is  hereby,  authorized  to  issue  #50,000,000  of  Treasury 
notes  on  the  faith  of  the  United  States,  payable  on  demand, 
without  specifying  any  place  of  payment,  and  of  such 
denominations  as  he  may  deem  expedient,  not  less  than  #5 
each,  which  shall  be  receivable  for  all  debts  and  demands 
due  to  the  United  States,  and  for  all  salaries,  dues,  debts, 
and  demands,  owing  by  the  United  States  to  individuals, 
corporations,  and  associations  within  the  United  States; 
and  such  Treasury  notes  shall  also  be  a  legal  tender  in 
payment  of  all  debts,  public  or  private,  within  the  United 
States,  and  shall  be  exchanged  at  any  time  at  their  par  value, 
the  same  as  coin,  at  the  Treasury  of  the  United  States,  and 
the  offices  of  Assistant  Treasurers  in  New  York,  Boston, 
Philadelphia,  St.  Louis,  and  Cincinnati,  for  any  of  the 
coupon  or  registered  bonds  which  the  Secretary  of  the 
Treasury  is  now,  or  may  hereafter  be,  authorized  to  issue; 
and  such  Treasury  notes  may  be  reissued,  from  time  to 
time,  as  the  exigencies  of  the  public  service  may  require. 
Such  Treasury  notes  shall  be  signed  by  the  Treasurer  of 
the  United  States,  or  by  some  officer  of  the  Treasury  De- 
partment designated  by  the  Secretary  of  the  Treasury, 
and  shall  be  countersigned  by  the  Register  of  the  Treasury, 
or  by  some  officer  of  the  Treasury  Department  designated 
by  the  Secretary  of  the  Treasury  for  the  Register.  And 
all  the  provisions  of  an  act  entitled  'An  act  to  authorize 
the  issue  of  Treasury  notes,  approved  the  23d  day  of  De- 
cember, 1857/  so  far  as  the  same  can  be  applied  to  the 
provisions  of  this  section,  and  not  inconsistent  therewith, 
are  hereby  revived  and  reenacted." 

Grave  doubts  were  expressed  in  many  quarters  as  to  the 
constitutionality  and  economic  soundness  of  the  measure. 
The  leading  New  York  papers  generally  opposed  making 
the  notes  legal  tender,  and  a  committee  from  the  banks  of 
New  York,  Philadelphia,  and  Boston  hurried  to  Washington 


JOHN    CLAFLIN 

chant;   bom  in    B  July    24,   1850;  sun  Hi 

Brigha  aduated  College  City  ol 

al.,  June  27,   1890, 

1  )unn.     Entered   drygoods  house  of  H.   B. 

Claflin  &  (  is  father  in  1843)  as  elerk,  October, 

the  house  on  death 
of  fai;  1  corporation,  The  H.  B. 

Claflin  Co.,  Jvu  its  president;  house 

gdods 
basin,  extensive  traveler  in 

outh  America,  Europe,  and  Asia; 
made  notable  trip  in  sin  1    Peruvian 

n  at  lat.  10'  S.,  and  with  single  white 
inent,  reaching    the 
Atlantic  at  mouth  1  a.     Is   director   in  many  financial 

institutions;  pn  United  Drygoods  Companies,  and 

president  of  tb  irk  Chamber  of  Commerce. 


NEW  YORK  AND  NATIONAL  FINANCE  123 

to  prevent  the  passage  of  the  bill.  The  New  York  delegates 
were  Messrs.  Coe  of  the  American  Exchange  Bank,  Vermilye 
of  the  Merchants'  Hank,  Martin  of  the  Ocean  Hank,  and 
Gallatin  of  the  National  Bank.  An  important  conference 
was  held  on  Saturday  afternoon,  January  II,  1862,  in  the 
office  of  the  Secretary  of  the  Treasury,  at  which  the  members 
of  the  Finance  Committee  of  the  Senate  and  of  the  House 
Committee  on  Ways  and  Means  were  invited  to  be  present. 
The  principal  speech  against  making  the  notes  legal  tender 
was  made  by  James  Gallatin,  lineal  descendant  of  the  great 
Secretary  of  the  Treasury  who  had  reduced  the  debt  and 
maintained  the  public  credit  during  the  administration  of 
Jefferson  and  the  early  years  of  Madison.  The  citizens' 
committee,  on  behalf  of  the  bankers  of  the  three  leading 
cities  and  members  from  boards  of  trade  associated  with 
them,  proposed  a  substitute  plan,  for  raising  at  once 
#125,000,000  by  other  taxes  than  the  customs;  the  issue 
of  $100,000,000  in  two-year  Treasury  notes,  to  be  receivable 
for  public  dues;  the  suspension  of  the  sub-Treasury  act; 
the  issue  of  six  per  cent.  20-year  bonds,  without  restriction 
as  to  the  price  at  which  they  might  be  sold  by  the  Secretary 
of  the  Treasury;  and  temporary  loans  upon  the  security 
of  the  bonds. 

These  recommendations  were  objected  to  by  Secretary 
Chase,  who  was  present,  by  Mr.  Hooper,  and  by  others. 
Mr.  Spaulding  "objected  to  any  and  every  form  of  'shin- 
ning' by  government  through  Wall  or  State  Streets  to 
begin  with;  objected  to  the  knocking  down  of  government 
stocks  to  75  or  60  cents  on  the  dollar,  the  inevitable  result 
of  throwing  a  new  and  large  loan  on  the  market,  without 
limitation  as  to  price;  claimed  for  Treasury  notes  as  much 
virtue  of  par  value  as  the  notes  of  banks  which  have 
suspended  specie  payments,"  and  finished  with  "firmly 
refusing  to  assent  to  any  scheme  which  should  permit  a 


124  PROGRESS  OF  THE   EMPIRE  STATE 

speculation  by  brokers,  bankers,  and  others  in  the  govern- 
ment securities."1 

The  bank  delegates  and  others  remained  for  several 
days  in  Washington,  consulting  with  Secretary  Chase,  and 
finally  reached  an  agreement  with  him  which  was  under- 
stood to  make  the  issue  of  legal-tender  demand  notes 
unnecessary.  The  committee  of  the  Senate  and  House, 
however,  did  not  give  their  assent  to  this  agreement,  because 
it  was  not  deemed  by  them  adequate  to  the  crisis.  A 
majority  of  the  Committee  on  Ways  and  Means  adhered 
to  the  legal-tender  bill.  They  hesitated  to  pass  it,  however, 
without  the  approval  of  the  Secretary  of  the  Treasury,  which 
had  been  withheld  in  his  annual  report.  Secretary  Chase 
was  permitted  to  suggest  several  amendments,  and  finally, 
in  a  letter  to  Mr.  Spaulding  of  January  22,  1862,  concluded 
as  follows: 

"Regretting  exceedingly  that  it  is  found  necessary  to 
resort  to  the  measure  of  making  fundable  notes  of  the  United 
States  a  legal  tender,  but  heartily  desiring  to  cooperate 
with  the  Committee  in  all  measures  to  meet  existing  neces- 
sities in  the  mode  most  useful  and  least  hurtful  to  general 
interest,  I  remain,  with  great  respect, 

"Very  sincerely  yours, 

"S.  P.  Chase." 

In  spite  of  the  protests  of  the  financial  interests,  the 
bill  was  reported  favorably  to  the  House,  and  called  up 
for  discussion  on  January  28,  1862.  A  letter  was  read  on 
Monday,  February  3d,  still  further  committing  the  Secre- 
tary of  the  Treasury  to  the  bill,  in  the  following  terms2: 

"It  is  true  that  I  came  with  reluctance  to  the  conclusion 
that  the  legal-tender  clause  is  a  necessity,  but  I  came  to  it 
decidedly,  and  I  support  it  earnestly.     I  do  not  hesitate 

1  Report  in  New  York  Tribune,  January  13,  1862,  quoted  by  Spaulding,  p.  21. 
1  Spaulding,  p.  59. 


NEW  YORK  AND  NATIONAL  FINANCE  125 

when  I  have  made  up  my  mind,  however  much  regret  I  may 
feel  over  the  necessity  of  the  conclusion  to  which  I  come. 
.  .  .  Immediate  action  is  of  great  importance.  The 
Treasury  is  nearly  empty.  I  have  been  obliged  to  draw 
for  the  last  installment  of  the  November  loan;  so  soon  as  it 
is  paid,  I  fear  the  banks  generally  will  refuse  to  receive  the 
United  States  notes.  You  will  see  the  necessity  of  urging 
the  bill  through  without  more  delay." 

The  bill  passed  the  House  on  February  6th  and  passed 
the  Senate,  after  an  exciting  debate,  on  Thursday,  February 
12,1862.  The  vote  in  the  Senate  was  23  in  the  affirmative 
and  21  in  the  negative.  It  was  in  vain  that  Preston  King, 
Senator  from  New  York,  moved  to  strike  out  the  legal-tender 
clause  and  declared  himself  decidedly  against  the  measure. 
Some  amendments  were  made  in  the  Senate,  however, 
looking  towards  adherence  to  the  policy  of  paying  interest 
on  the  public  debt  in  coin  and  authorizing  the  sale  of  bonds 
at  the  market  price.  Against  these  amendments,  when  the 
bill  came  back  to  the  House,  Mr.  Spaulding  set  his  face, 
but  the  voice  of  another  New  Yorker,  Theodore  M. 
Pomeroy  of  Cayuga,  was  raised  vigorously  in  their  favor. 
"We  cannot,"  he  declared,  "make  Treasury  notes  money 
until  we  can  change  by  act  of  Congress  a  promise  into  a 
performance,  and  Almighty  power  alone  can  do  that." 
His  view  prevailed  to  the  extent  that  payment  of  interest 
on  the  debt  in  coin  was  agreed  to,  88  to  56,  and  was  retained, 
with  some  modifications,  in  the  draft  which  became  law. 
Among  the  yeas  on  this  important  amendment  appear  the 
names  of  Roscoe  Conkling,  Mr.  Corning,  Mr.  Pomeroy, 
and  William  A.  Wheeler,  afterwards  Vice-President  of  the 
United  States.  It  was  indeed  upon  the  motion  of  Mr. 
Conkling,  then  serving  his  second  term  in  the  House  as  a 
young  man  of  thirty-two,  that  the  yeas  and  nays  were 
ordered.     The  bill  became  law  on  February  25,1862. 


126  PROGRESS  OF  THE   EMPIRE  STATE 

The  government,  thus  committed  to  the  issue  of  irre- 
deemable legal-tender  paper,  did  not  long  keep  the  promise 
made  in  the  debate — that  the  amount  should  be  strictly 
limited.  Having  once  entered  upon  the  slippery  path,  the 
descent  became  as  easy  as  the  fabled  slopes  of  Avernus, 
and  the  country  soon  found  itself  with  a  currency  depreci- 
ated at  its  low  point  to  about  40  cents  on  the  dollar,  and 
marketing  its  securities  for  the  same  depreciated  currency. 
The  price  of  gold  advanced,  with  only  occasional  inter- 
ruptions, until  in  1864  it  touched  285.  Wholesale  prices 
of  nearly  all  articles  mounted  upward  with  the  gold  pre- 
mium, and  retail  prices  in  many  cases  advanced  still  more, 
increasing  the  paper  cost  of  every  contract  for  carrying  on 
the  war.  A  computation  of  the  proceeds  of  #2,565,233,591 
in  currency  received  from  the  sale  of  public  obligations 
during  the  forty-five  months  ending  September  30,  1865, 
put  the  gold  value  received  at  #1,705,347,632,  repre- 
senting a  loss  to  the  government  by  its  depressed  credit 
of  #860,000,000/ 

Important  as  was  the  part  played  by  Mr.  Spaulding  in 
the  adoption  of  this  policy,  it  is  possible  that  a  similar 
policy  would  have  been  adopted  in  any  event,  in  view  of  the 
straits  in  which  the  government  was  placed  and  the  rudi- 
mentary knowledge  of  financial  devices  which  then  existed 
at  Washington.  Mr.  Spaulding  himself  declares,  on  the 
first  page  of  his  book  giving  an  account  of  the  legislation, 
that: 

"The  fundable  legal-tender  currency  was  the  most 
available  form  of  credit  which  the  government  could  use  in 
crushing  the  rebellion.  It  was  at  once  a  loan  to  the  govern- 
ment without  interest,  and  a  national  currency,  which  was 
so  much   needed   for  disbursement   in   small   sums  during 

1  Conant,  History  of  Modern  Banks  of  Issue,  New  York,  G.  P.  Putnam's  Sons, 
p.  401. 


NLW  YORK  AND  NATIONAL  FINANCE  127 

the  pressing  exigencies  of  the  war.  It  was  indispensably 
necessary,  and  a  most  powerful  instrumentality  in  saving 
the  government  and  maintaining  the  national  unity. 
Experience  has  proved  that,  notwithstanding  it  was  a 
forced  loan,  the  end  justified  the  means,  and  that  no  parties 
were  materially  injured  by  being  compelled  to  receive 
this  currency,  so  long  as  they  could  fund  it  at  any  time  in 
six  per  cent.  20-year  bonds." 

While  thus  resolutely  defending  the  issue  of  the  green- 
backs under  the  conditions  of  the  time,  Mr.  -Spaulding  did 
not  believe  in  them  as  a  permanent  currency.  In  an 
address  at  the  Centennial  Exposition  in  Philadelphia  in 
1876,  he  said1: 

"Unfortunately,  eleven  years  after  the  close  of  the 
war,  the  temporary  'war  currency'  issued  in  the  form  of 
greenbacks,  still  lingers  as  an  evil  element,  and  is  declared 
by  law  to  be  'lawful  money,'  so  that  the  banks  can  and  do 
redeem  their  circulating  notes  in  this  depreciated  greenback 
currency.     This  is  practically  no  redemption  at  all." 

In  a  preface  to  his  Financial  History  of  the  War,  written 
in  1875,  Mr.  Spaulding  went  further  and  declared  that  the 
legal  tender  act  should  be  repealed,  which  would  "leave 
the  business  of  free  banking  where  it  belongs,  open  to  all 
citizens,  to  be  carried  on  upon  a  gold  basis,  under  proper 
legislative  restrictions." 

The  numerous  issues  of  bonds  which  the  government 
put  forth  to  meet  the  expenses  of  the  war  were  always 
generously  subscribed  for  by  New  York  bankers  up  to  the 
limit  of  their  resources.  Conspicuous  in  services  rendered 
in  this  respect  were  the  foreign  houses,  like  August  Belmont 
&  Company,  the  representative  of  the  Rothschilds;  the 
Seligmans  and    Speyers;   Morton,  Bliss  &  Company;   and 

1  John  J.  Knox,  History  of  Banking  in  the  United  States,  New  York,  Bradford 
Rhodes  &  Company,  1900,  p.  293. 


128  PROGRESS  OF  THE   EMPIRE  STATE 

Jay  Cooke  &  Company.  The  latter,  when  all  other 
resources  had  failed,  inaugurated  the  system  of  inviting 
popular  subscriptions  for  the  bonds  through  every  post- 
master throughout  the  United  States.  They  also  succeeded 
in  the  rather  venturesome  policy  of  manipulating  quotations 
when  it  was  desired  to  make  a  broad  market  for  new  bonds. 
Of  the  character  of  these  operations  an  interesting  glimpse 
is  afforded  by  Jay  Cooke's  biographer1: 

"Once  this  policy  had  been  undertaken  there  was 
almost  no  end  to  the  need  of  intervention  to  serve  some 
object,  important,  if  not  vital,  to  the  management  of  the 
Treasury  Department,  and  in  these  movements  there  was 
still  none  who  had  his  skill  and  facility.  The  necessity 
would  continue  so  long  as  the  government  had  funding 
operations  in  hand,  and  there  were  two  currencies,  one 
founded  upon  the  value  of  gold  and  the  other  of  the  chang- 
ing greenback.  Indeed  Mr.  Cooke  had  scarcely  a  day  of 
freedom  from  responsibility  for  the  behavior  of  the  market 
from  the  panicky  times  in  March,  1865,  induced  by  the 
fall  of  the  Confederacy,  until  the  end  of  the  year.  On 
August  1 8th  Fisk  and  Hatch  told  Mr.  Cooke  that  their 
purchases  of  7-30S  for  that  day  for  government  account  had 
been  nearly  $1,500,000,  all  at  99^.  They  had  got  nearly 
the  same  amount  the  day  before  at  99.  The  surplus  which 
could  not  be  sold  in  the  course  of  the  operations  was  turned 
over  to  Assistant  Treasurer  Van  Dyck  (who  had  been  ap- 
pointed to  succeed  John  A.  Stewart),  to  be  held  for  a  more 
favorable  market.  The  next  day  the  price  was  again 
advanced  and  Fisk  &  Hatch  wrote  that  'nobody  smelt 
the  rat,'  'the  strength  of  the  great  7-30  loan'  being  'the 
subject  of  general  comment  and  congratulation.' 

"Once  more  the  editors  were  'primed'  and  the  news- 

•  Jay  Cooke;  Financier  of  the  Civil  War,  by  Ellis  Paxson  Oberholtzer,  Philadel- 
phia, 1907,  vol.  ii.,  pp.  2-3. 


-^SL//// 


ISIDOR  STRAUS 

Merchant  and  an;  born  u  Bavaria. 

nited  States  in  1854,  with  his 
mother,  and  settled  in  Ta  ollinsworth 

and  was  preparing  to  enter  the  Military  Academy 
at    West    Point  when  he  was  p  :   by  the  outbreak  of  the 

Civil  War.  Mr.  Straus  went  to  New  York  in  1865,  where,  with 
his  father,  he  organized  the  firm  of  L.  Straus  &  Son.  Entered 
rm  of  R.  II.  Mary  &  Co.  in  1888,  and  of  Abraham  Straus,  of 
klyn,  in  1893.  Had  an  important  interview  with  President 
Cleveland  in  the  summer  of  1893  on  the  necessity  for  an  extra 
•n  of  Congress  to  repeal  the  Sherman  silver  purchase  law. 
Was  elected  to  Congress  as  a  Democrat  at  a  special  election  on 
January  30,  1894.  Became  intimate  friend  of  William  L.  Wilson, 
the  Democratic  leader,  and  aided  him  greatly  in  the  contest  for 
sound  money  and  the  Wilson  tariff  law.  Was  long  an  active 
member  of  the  Chamber  of  Commerce,  serving  as  vice-president, 
and  on  important  committees,  including  the  special  committee 
on  currency  reform  in  1906,  which  made  the  first  formal  recom- 
mendation for  a  central  bank.  Mr.  Straus  was  a  director  in  various 
banks,  trust  companies,  and  charitable  institutions;  president 
of  the  Educational  Alliance,  and  vice-president  of  the  J.  Hood 
Wright  Memorial  Hospital.  He  went  down  bravely  on  the  Ti- 
tanic on  April  15,  1912,  Mrs-Straus  refusing  to  leave  him,  both 
preferring  to  end  their  lives  together. 


NEW  YORK  AND  NATIONAL  FINANCE  129 

papers,  practically  in  unison,  proclaimed  the  great  worth 
of  'governments.'  Secretary  McCulloch  had  offered  to 
take  #5,000,000  and  on  August  21st  #3,275,000  had  been 
delivered  to  Van  Dyck.  Fisk  and  Hatch  were  anxious  that 
the  authority  should  be  extended  to  ten  or  fifteen  millions. 
Jay  Cooke,  acting  through  his  brother  Henry  at  Washington, 
persuaded  Mr.  McCulloch  to  agree  to  an  extension  to  seven 
millions,  which  led  to  a  long  statement  by  Fisk  &  Hatch 
that  to  take  proper  care  of  the  market,  correct  the  evils  of 
a  too  rapid  absorption  of  the  loan,  remove  it  from  the  hands 
of  large  holders  whose  demands  were  urgent,  and  place  it 
with  legitimate  investors,  authority  should  be  at  hand  to 
sell  at  least  ten  or  twenty  millions.  They  (Fisk  &  Hatch) 
could  make  more  money  dealing  in  seven-thirties  at  the 
low  price,  but  they  did  not  wish  to  see  the  loan  'buffeted 
about  in  that  way.'  On  this  letter  Jay  Cooke  wrote: 
'These  are  my  sentiments  also,'  and  it  was  sent  to  Henry 
Cooke,  who  took  it  to  Mr.  McCulloch.  The  result  of  the 
interview  was  that  the  Secretary  left  'the  whole  matter' 
to  Jay  Cooke's  'discretion.'" 

When  the  time  came  after  the  war  for  restoring  order 
to  the  finances  of  the  country,  the  bankers  of  New  York 
naturally  took  the  lead  in  urging  the  resumption  of  specie 
payments  upon  a  gold  basis.  During  fifteen  years  of 
agitation,  in  which  the  South  and  West  repeatedly  returned 
to  Congress  great  majorities  for  paper  inflation  and  the 
free  coinage  of  silver,  the  business  community  of  New  York, 
without  distinction  of  party,  held  up  the  hands  of  the 
President  and  the  Secretary  of  the  Treasury,  who  could 
usually  be  relied  upon  to  support  the  principles  of  sound 
money.  How  closely  the  government  and  the  business  com- 
munity worked  together,  even  when  differences  of  opinion 
arose,  is  graphically  set  forth  in  Mr.  Hackett's  memoir  of 
Secretary  Richardson.     It  was  on  Saturday,  September  20, 


130  PROGRESS  OF  THE   EMPIRE   STATE 

1873,  only  two  days  after  the  Jay  Cooke  suspension,  that 
President  Grant  telegraphed  the  Secretary  from  Long 
Branch  to  meet  him  the  next  morning  in  New  York  at  the 
Fifth  Avenue  Hotel.  The  scene  is  thus  described  by  Mr. 
Hackett1: 

"Arrangements  had  been  made  for  the  interview  with 
the  President  on  the  part  of  the  bankers  and  business  men. 
Ten  o'clock  was  fixed  upon  as  the  hour.  They  had  come 
to  the  hotel  in  great  numbers.  It  was  Sunday,  but  the 
hotel  was  crowded,  and  so  were  the  streets  in  the  neigh- 
borhood. A  prominent  Republican  Senator,  one  of  the 
foremost  statesmen  of  the  country,  was  there,  as  a  guest  of 
the  hotel,  and  to  judge  from  competent  testimony  he  was 
the  most  frightened  man  on  the  premises.  He  seemed  to 
be  bewildered,  and  really  knew  not  what  to  do. 

"Reverdy  Johnson  was  also  present,  consulted  by  the 
bankers,  whom  he  furnished  with  a  legal  opinion,  taking 
the  curious  ground  that  under  the  law  the  President  and 
Secretary  had  no  power  to  issue  the  greenbacks,  but  that 
if  he  were  in  the  President's  place  he  would  feel  it  his 
duty  to  issue  them;  and  that  in  his  opinion  the  country 
would  sustain  the  President  in  so  doing. 

"At  the  appointed  hour,  the  President  and  the  Secretary 
took  their  seats  at  a  table  in  one  of  the  large  parlors,  and 
the  bankers,  with  others,  came  in.  Among  those  present 
were  Commodore  Vanderbilt,  Henry  Clews,  the  Seligmans, 
George  P.  Opdycke,  Isaac  H.  Bailey,  William  Orton  of  the 
Western  Union  Telegraph  Company,  William  L.  Scott, 
Robert  Lenox  Kennedy,  H.  B.  Claflin  and  Mr.  Vail,  of  the 
Bank  of  Commerce. 

"The  excitement  ran  high.  Many  speeches  were  made, 
some  of  them  almost  violent  in  tone,  calling  upon  the  Presi- 

1  A  Sketch  of  tlie  Life  and  Public   Services   of   William   Adams  Richardson,  by 
Frank  Warren  Hackett,  Washington,  1898,  pp.  93-95. 


NEW  YORK  AND  NATIONAL  FINANCE  131 

dent  at  once  to  issue  the  whole  forty-four  millions  reserve. 
The  speakers  said  if  the  panic  were  not  stopped,  we  should 
see  the  worst  mob  in  New  York  the  next  day  that  had  ever 
been  known  in  that  city;  that  already  the  streets  were 
full  of  men,  and  in  the  morning  the  situation  would  be  worse. 

"It  seemed  to  have  occurred  to  no  one  to  point  out  how 
the  reserve  could  be  issued,  or  to  designate  the  manner  in 
which  it  could  be  put  into  circulation.  The  President  sat 
perfectly  calm.  At  last  he  said  that  anything  to  be  sub- 
mitted to  him  must  be  in  writing,  so  that  he  could  know 
exactly  what  they  thought  should  be  done." 

The  request  for  the  issue  of  the  entire  greenback  reserve 
was  refused,  upon  the  ground  that  there  was  no  law  which 
permitted  the  President  to  lend  government  money;  but 
public  funds  were  disbursed  for  the  purchase  of  #12,000,000 
in  bonds,  and  clearing-house  certificates  were  issued  by  the 
banks.  During  the  entire  period  from  March,  1873,  to 
January,  1874,  about  #26,000,000  was  expended  in  this 
manner. 

When  finally  the  Resumption  Act  of  1875  was  enacted, 
requiring  the  redemption  of  government  notes  in  gold  at 
par  on  and  after  January  1,  1879,  tne  New  York  banks  took 
every  measure  to  aid  the  government  in  avoiding  a  drain 
upon  the  gold  fund  which  Secretary  Sherman  by  the  sale  of 
bonds  had  laboriously  built  up.  The  banks  of  the  country 
held  more  than  #125,000,000  in  government  notes,  of  which 
nearly  one  third  was  in  New  York  City.  If  the  banks  had 
acted  upon  a  narrow  policy,  they  could  have  greatly  reduced 
the  gold  fund  by  the  presentation  of  these  notes.  On  the 
contrary,  a  committee  was  appointed  to  confer  with  Secre- 
tary Sherman  to  agree  upon  a  common  course  of  action  to 
sustain  the  public  credit.  The  Assistant  Treasurer  at 
New  York  was  invited  to  become  a  member  of  the  Clearing 
House,  and  balances  between  the  banks  and  the  Treasury 


132 


PROGRESS  OF  THE   EMPIRE   STATE 


were  to  be  settled  through  the  Clearing  House.  The  banks 
decided  voluntarily  to  decline  receiving  gold  as  a  special 
deposit,  to  abolish  special  exchanges  of  gold  checks  at 
the  Clearing  House,  and  to  receive  and  pay  balances  with- 
out discriminating  between  gold  and  legal-tender  notes. 
This  action  dissipated  all  serious  fear  of  the  success  of  re- 
sumption, and  on  December  17,  1878 — two  weeks  before 
the  date  legally  set — gold  sold  at  par  in  the  gold  room  of  the 
New  York  Stock  Exchange.  The  banks,  in  the  language 
of  Mr.  Bolles,  at  the  beginning  of  the  war,  "parted  with 
their  gold  to  aid  the  government,  and  now,  when  resumption 
was  accomplished,  they  were  content  to  take  whatever 
it  desired  to  give."1 

When  the  necessary  measures  for  refunding  the  public 
debt  at  a  reduced  rate  of  interest  were  being  carried  out  in 
London  by  representatives  of  most  of  the  large  houses  of 
New  York,  it  was  represented  repeatedly  to  the  President 
and  Secretary  of  the  Treasury  that  these  negotiations  must 
fail  if  the  United  States  took  a  step  toward  free  silver  and 
away  from  the  gold  standard.  When  the  two  Houses  of 
Congress  (in  February,  1878)  passed,  over  the  veto  of 
President  Hayes,  the  Bland  Silver  Act,  requiring  a  fixed 
amount  of  silver  coinage  per  month,  the  syndicate  handling 
the  loan  gave  notice  that  they  would  be  unable  to  carry  out 
the  provisions  of  the  agreement  which  had  been  proposed, 
but  they  were  still  ready  to  negotiate  the  bonds  of  the 
government  abroad  under  the  most  favorable  conditions 
which  could  be  obtained  in  view  of  the  blow  struck  by 
Congress  at  the  public  credit. 

It  was  not  only  under  a  New  York  President,  Chester 
A.  Arthur,  but  under  a  New  York  Secretary  of  the  Treasury, 
Charles  J.  Folger,  that  recognition  was  finally  given  by 
Congress  to  the  $100,000,000  limit  for  the  gold  reserve  held 

1  Financial  History  of  the  United  Slates,  vol.  iii.,  p.  301. 


NEW  YORK  AND  NATIONAL  FINANCE  133 

for  the  redemption  of  the  greenbacks.  In  the  act  of  July 
12,1882,  extending  the  charters  of  national  banks,  provision 
was  made  for  the  issue  of  gold  certificates  against  deposits  of 
gold  coin  with  the  Treasury  and  it  was  provided  that  the 
issue  of  such  certificates  should  be  suspended  whenever  the 
gold  held  against  outstanding  United  States  notes  should 
fall  below  #100,000,000.'  These  certificates,  being  issued 
at  first  chiefly  in  large  denominations,  were  employed  to  a 
considerable  extent  by  the  banks  in  advancing  funds  to 
their  clients  for  the  payment  of  customs  duties,  and  it  was 
the  drying-up  of  this  stream  of  gold  and  the  substitution  of 
silver  certificates  which  sounded  the  alarm  as  to  the  weak- 
ened condition  of  the  Treasury  in  1892  and  led  a  little  later 
to  the  automatic  application  of  the  law  against  the  issue  of 
gold  certificates.2 

In  the  act  of  1882  was  contained  another  provision, 
probably  not  very  acceptable  to  Secretary  Folger,  that  no 
national  bank  should  be  a  member  of  any  clearing  house  in 
which  silver  certificates  were  not  received  in  settlement  of 
clearing-house  balances.  This  provision  was  directed 
against  a  rule  of  the  New  York  Clearing  House,  which 
aimed  to  protect  the  gold  standard  by  discriminating  against 
silver  as  a  money  of  ultimate  settlement.  The  New  York 
banks  felt  that,  as  custodians  of  the  ultimate  banking 
reserve  of  the  country  and  the  channel  through  which 
balances  with  foreign  countries  were  settled  on  the  gold 
basis,  they  could  not  allow  their  vaults  to  become  congested 
with  the  new  silver  dollars.  To  permit  such  an  occurrence 
would  send  gold  to  a  premium  and  send  the  country  to  the 
silver  standard.3 

1  Cf .     The  Contest  for  Sound  Money,  A.  Barton  Hepburn,  New  York,  1903,  p.  243. 

2  Vide  Conant,  A  History  of  Modern  Banks  of  Issue,  Fourth  Edition,  New  York, 
1909,  pp.  687-688. 

J  Cf.  the  admirable  discussion  by  A.  D.  Noyes,  Forty  Years  of  American  Finance, 
New  York,  1909,  pp.  77-81. 


134  PROGRESS  OF  THE   EMPIRE   STATE 

The  maintenance  of  gold  payments  was  several  times 
threatened  during  the  last  two  decades  of  the  nineteenth 
century  by  the  agitation  for  the  free  coinage  of  silver. 
On  all  occasions  the  bankers  of  New  York  stood  firmly  by 
the  government  and  several  times  parted  with  gold  volun- 
tarily in  order  to  strengthen  the  reserve  held  in  the  Treasury 
against  the  greenbacks.  When  a  Democratic  administra- 
tion succeeded  a  long  line  of  Republican  Presidents  who 
had  completed  the  work  of  the  Civil  War,  the  bankers  of 
New  York  without  distinction  of  party  stood  as  resolutely 
by  President  Cleveland  in  his  monetary  policy  as  they  had 
stood  by  Presidents  Grant,  Hayes,  Garfield,  and  Arthur  in 
theirs.  It  was  the  resolute  stand  of  Mr.  Cleveland  for  the 
gold  standard  and  in  opposition  to  free  coinage  which  drew 
the  business  community  of  New  York  so  largely  to  his 
support  and  secured  his  renomination  and  election  in  1892. 
It  was  by  the  skillful  management  of  William  C.  Whitney 
as  a  representative  of  this  sentiment  that  opposition  was 
smoothed  away  in  the  Democratic  National  Convention 
of  that  year  and  party  leaders  were  convinced  that  Mr. 
Cleveland  was  the  one  man,  with  whom  they  could  appeal 
with  confidence  to  the  American  people. 

When  the  country  began  to  pay  the  penalty  of  many 
years  of  incompetent  financiering  in  1893,  New  York 
bankers  formed  a  combination,  and  within  a  few  days,  with 
the  help  of  leading  members  of  the  profession  in  Boston, 
Baltimore,  Chicago,  and  Philadelphia,  increased  the  govern- 
ment gold  reserve  by  #6,500,000.  But  such  measures  were 
only  palliatives.  The  enactment  of  the  Sherman  silver 
purchase  law  of  June  14,1890,  against  which  Eastern  bankers 
and  business  men  were  all  but  unanimous  in  their  opposition, 
soon  invoked  a  crisis.  Gold  exports  began  in  large  volume 
the  month  the  law  was  approved.  The  theory  of  Gresham's 
law,  that  the  departure  of  gold  denotes  the  presence  of  a 


NEW  YORK  AND  NATIONAL  FINANCE  135 

poorer  currency  behind  the  gold,  expelling  it  from  the 
country,  was  verified  by  the  manner  in  which  the  gold  went 
out  as  the  new  Treasury  notes  were  pumped  into  the  cir- 
culation at  the  rate  of  #4,500,000  per  month  .  The  Treasury 
notes  issued  under  the  law  up  to  June  30,  1893,  were 
#147,190,227;  the  net  gold  exports  from  the  United  States 
from  June  30,  1890,  to  June  30,  1893,  were  #156,132,423 ; 
and  the  reduction  of  the  aggregate  gold  in  the  Treasury 
during  the  same  period  was  #133,156,991.  Other  causes 
than  the  mere  addition  of  the  notes  to  the  circulating 
medium  doubtless  contributed  to  the  expulsion  of  gold,  but 
the  coincidence  of  these  three  items — the  loss  of  gold  by 
the  Treasury,  its  export  from  the  United  States,  and  the 
issues  of  notes — is  at  least  striking. 

Commercial  failures  began  to  multiply  with  alarming 
rapidity;  the  banks,  warned  by  the  Baring  failure  in  London, 
began  to  curtail  their  loans  and  strengthen  their  specie 
holdings;  and  weak  banks  throughout  the  West  began  to 
suspend  payments.  When  upon  the  heels  of  these  condi- 
tions came  the  suspension  of  silver  coinage  in  British  India 
and  the  sudden  drop  in  the  price  of  silver  by  iod.  within 
three  weeks,  the  injurious  results  of  the  silver  policy  became 
apparent  to  the  country.  The  Treasury  was  almost  empty 
and  President  Cleveland  received  the  applause  of  the  busi- 
ness community  when  he  called  an  extra  session  of  Congress 
for  August  7th.  It  was  this  special  session  which  reversed 
and  ended  the  policy  of  unnecessary  purchases  of  silver  for 
coinage  purposes,  and  marked  the  beginning  of  the  great 
contest  for  sound  money  which  resulted  in  1900  in  the 
enactment  of  the  Gold  Standard  Law  and  in  1908  in  the 
creation  of  the  National  Monetary  Commission  for  the 
reform  of  the  banking  system.  In  this  long,  continuous 
struggle,  men  of  New  York,  in  Congress  and  the  Cabinet 
as  well  as  at  home,  bore  a  conspicuous  and  loyal  part. 


136  PROGRESS  OF  THE   EMPIRE   STATE 

Foremost  among  these  men  was  the  man  twice  chosen 
President  of  the  United  States — Grover  Cleveland.  Mr. 
Cleveland  showed  an  independence  in  expressing  his  antago- 
nism to  free  silver  or  to  increased  issues  of  full  legal- 
tender  silver  dollars  which  even  to  some  of  his  friends  often 
seemed  so  audacious  as  to  imperil  his  political  future.  One 
of  his  first  acts,  before  taking  office  in  1885,  was  to  write  a 
vigorous  letter  to  the  Democratic  members  of  Congress, 
urging  that  the  further  purchase  of  silver  and  the  coinage 
of  silver  dollars  under  the  Bland  law  should  be  brought  to 
an  end.  On  every  occasion  when  an  issue  was  raised  Mr. 
Cleveland  was  frank  to  express  his  opposition  to  silver 
inflation.  It  mattered  not  whether  it  was  on  the  eve  of 
an  important  convention,  where  his  opposition  might 
adversely  affect  his  chances  for  votes;  it  mattered  not  how 
earnestly  even  his  sound-money  friends  urged  that  it  would 
be  politic  to  keep  quiet  for  the  time  being. 

In  February,  1891,  almost  on  the  eve  of  the  contest  for 
delegates  to  the  National  Convention  of  1892,  Mr.  Cleve- 
land wrote  a  vigorous  letter  expressing  his  hostility  to  free 
silver.  Then,  after  his  election  in  1892,  came  the  crisis  of 
1893,  tne  special  session  of  Congress  to  repeal  the  silver 
purchase  law,  and  the  long,  bitter  fight  which  is  elsewhere 
referred  to.  It  is  significant  of  Mr.  Cleveland's  firmness  in 
this  contest,  that  when  Senator  Gorman  of  Maryland  and 
other  sound-money  leaders  were  willing  to  yield  a  little  in 
order  to  accomplish  the  immediate  passage  of  some  sort 
of  repeal  bill,  Mr.  Cleveland  put  his  foot  down  like  a  rock 
and  refused  to  accept  anything  from  Congress  but  the 
absolute,  unconditional  suspension  of  further  purchases  of 
silver  for  coinage  into  full  legal-tender  money. 

Under  such  a  chief  it  is  not  surprising  that  other  New 
York  men  made  honorable  records  as  supporters  of  sound 
finance.     Mr.  Manning  as  Secretary  of  the  Treasury  from 


~- 


JOHN  MURRAY  MITCHELL 

Lawyer  and  member  of  Congress;  born  at  60  West  Ninth 
Street,  New  York  City,  March  [8,  1858;  graduated  fro 
Columbia  College,  1877,  with  the  degree  of  A.B.;  although  the 
youngest  member  of  his  class,  was  made  valedictorian;  completed 
a  course  in  Columbia  Law  School  in  1879,  receiving  the  degree 
of  LL.D.;  was  admitted  to  the  bar  immediately  thereafter.  Mr. 
Mitchell  was  nominated  by  acclamation  for  Congress  as  a  Re- 
publican in  1894,  in  a  district  usually  Democratic,  and  although 
defeated  on  the  face  of  the  returns,  was  seated  on  a  recount  by  a 
vote  in  Congress  of  162  to  39.  He  was  reelected  in  1896  and 
1898,  being  a  member  of  the  Committee  on  Banking,  where  he 
rendered  valuable  service  on  the  subcommittee  of  three  which 
prepared  the  McCleary  bill.     Died  May  31,  1905. 


NEW  YORK  AND  NATIONAL  FINANCE  137 

March  4,  1885,  to  his  death  in  1887,  repeatedly  urged  upon 
Congress  the  suspension  of  further  purchases  of  silver. 
His  annual  reports  were  as  emphatic  upon  this  subject  as 
those  of  any  of  his  Republican  predecessors  in  the  Treasury. 
Cordially  supporting  him  with  weighty  judgment  and 
clear  voice  was  Conrad  N.  Jordan,  then  United  States 
Treasurer,  and  under  Mr.  Cleveland's  second  administra- 
tion, Assistant  Treasurer  at  New  York.  Mr.  Jordan 
probably  gave  greater  prominence  to  the  two  offices  which 
he  held  than  any  other  man  who  has  occupied  them  in 
many  years. 

After  Mr.  Manning  had  laid  down  his  life  under  the 
pressure  of  his  exacting  duties,  Mr.  Charles  S.  Fairchild 
became  Secretary  of  the  Treasury.  Formerly  Attorney- 
General  of  New  York  and  Assistant  Secretary  of  the 
Treasury  under  Mr.  Manning,  Mr.  Fairchild  was  far  from 
being  of  the  usual  type  of  the  active  politician.  He  was 
a  scholar,  a  philosopher,  and  a  reformer.  Having  to  deal 
with  the  great  problem  of  an  accumulating  surplus,  he  dis- 
tributed the  money  among  the  banks,  in  order  to  keep  it 
at  the  command  of  commerce.  For  this  he  was  vigorously 
assailed  by  Mr.  James  G.  Blaine  in  the  Presidential  campaign 
of  1888,  but  Mr.feFairchild  replied  in  a  luminous  speech, 
on  the  steps  of  the  New  York  Sub-Treasury,  in  which  he 
maintained  that  under  the  condition  in  which  the  Treasury 
was  placed  by  the  imposition  of  taxation  beyond  its  needs 
he  had  taken  the  only  feasible  course  to  avert  dangerous 
pressure  in  the  money  market. 

In  Congress  the  New  York  delegation  of  both  parties 
could  usually  be  relied  upon  to  vote  solidly  against  any 
proposition  to  increase  the  output  of  silver  and  in  favor 
of  strengthening  the  gold  standard.  While  the  Repub- 
licans, except  for  their  unfortunate  vote  to  enact  the 
Sherman  silver  purchase   law  of   1890,  were  able  usually 


138  PROGRESS  OF  THE   EMPIRE   STATE 

to  give  a  larger  and  more  constant  number  of  votes 
than  their  opponents,  the  leading  Democrats  who  were 
for  the  gold  standard  were  conspicuous  by  their  coura- 
geous opposition  to  a  large  element  in  their  party.  Among 
them  none  was  more  steadfast  and  energetic  than  Gen- 
eral Charles  Tracey,  who  for  ten  years  represented 
the  Albany  district.  A  gentleman  of  wealth  and  cul- 
ture, who  had  served  in  the  Papal  Guards  when  the 
Italians  forced  their  way  into  Rome  in  1870,  General 
Tracey  possessed  that  equanimity  of  temper  and  perfect 
fairness  towards  opponents  which  held  their  respect  and 
friendship  at  the  very  moment  when  perhaps  he  might  be 
standing  out  alone  against  a  defined  party  policy.  So 
determined  was  he  that  the  party  and  Congress  should  not 
go  on  record  for  unsound  financial  legislation  that  he  was 
almost  constantly  in  his  seat,  watching  even  the  reading  of 
the  journal  and  ordinary  formal  motions  in  order  to  guard 
against  a  trap.  Many  times  his  watchfulness  was  rewarded 
by  checking  some  concession  to  silver  on  the  part  of  the 
majority,  or  by  drawing  enough  votes  away  from  his  own 
party  to  offset  the  silver  defection  in  the  ranks  of  the  other 
party. 

Supporting  General  Tracey  and  exercising  an  important 
influence  upon  party  policy  in  Congress  were  several  other 
New  York  Democrats.  Governor  Roswell  P.  Flower, 
during  his  short  service  in  the  House,  was  from  his  very 
position  a  sturdy  supporter  of  sound  money.  Isidor  Straus, 
the  great  New  York  merchant,  was  a  close  friend  of  William 
L.Wilson,  the  Democratic  leader  in  the  Fifty-third  Congress, 
and  influenced  Mr.  Wilson's  clear  mind  in  favor  of  the  posi- 
tion which  he  constantly  maintained,  in  support  of  President 
Cleveland  and  the  stoppage  of  further  purchases  of  silver. 

In  keeping  back  the  great  wave  of  silver  inflation  which 
carried  Mr.  Bryan  on  its  crest  in  1896  so  near  to  the  Presi- 


NEW  YORK  AND  NATIONAL  FINANCE  139 

dency  of  the  United  States,  it  goes  without  saying  that  the 
influence  of  the  bankers  and  business  men  of  New  York, 
with  their  heavy  contributions  to  the  cause,  was  felt 
throughout  the  Union  and  had  a  large  share  in  turning  the 
scale  in  the  doubtful  States.  There  was,  of  course,  never  a 
doubt  that  New  York  would  roll  up  the  largest  majority  in 
her  history  against  the  party  which  declared  for  unsound 
finance.  The  great  parade  of  merchants,  brokers,  clerks, 
and  laborers  a  few  days  before  election,  in  favor  of  McKinley 
and  sound  money,  was  perhaps  the  most  remarkable  demon- 
stration ever  held  in  New  York,  not  only  because  in  the 
ranks  marched  men  with  enormous  interests  at  stake, 
who  rarely  took  part  in  political  demonstrations,  but  also 
because  a  large  proportion  of  them,  if  not  the  majority, 
had  previously  voted  against  the  party  whose  candidate 
they  now  supported. 

Out  of  the  election  of  President  McKinley  came  the 
administration  of  another  New  Yorker  at  the  head  of  the 
Treasury.  Lyman  J.  Gage,  although  appointed  from 
Chicago,  where  he  had  passed  his  mature  years  as  the 
leading  banker  and  financial  authority  of  the  West,  was, 
nevertheless,  born  in  the  interior  of  New  York,  and  learned 
his  first  lessons  as  a  banker  under  the  New  York  State 
banking  system.  It  was  perhaps  his  New  York  training 
which  contributed  something,  apart  from  his  native  inde- 
pendence, to  his  outspoken  declaration,  soon  after  taking 
office  in  1897,  that  it  was  his  purpose  to  fasten  the  gold 
standard  more  firmly  upon  the  country. 

It  was  still  the  fashion  with  some  of  the  politicians,  even 
after  the  verdict  of  1896  against  free  silver,  to  be  mealy- 
mouthed  in  using  the  word  "gold."  Mr.  Gage  sounded 
the  keynote  of  the  new  order  of  things.  He  rendered  great 
services  in  putting  the  gold  standard  firmly  upon  the 
statute  books  and  in  educating  the  country  to  a  sound 


140  PROGRESS  OF  THE   EMPIRE   STATE 

theory  of  banking.  Again  and  again  his  annual  reports 
recommended  that  the  gold  reserve  should  be  segregated 
from  the  current  funds  of  the  Treasury,  that  the  greenbacks 
should  be  payable  specifically  in  gold,  and  that  gold  should 
be  held,  if  necessary,  for  the  redemption  of  the  great  mass 
of  outstanding  silver  dollars.  He  had  the  fortune  which 
does  not  always  come  to  those  who  are  in  advance  of  their 
time,  that  a  measure  embodying  nearly  all  these  principles  be- 
came a  law  and  was  put  into  operation  under  his  administra- 
tion. It  was  March  14,  1900,  when  President  McKinley 
affixed  his  signature  to  the  Gold  Standard  Act  and  it  became 
possible  for  the  United  States  to  take  its  place  in  the  ranks 
of  nations  whose  obligations  were  payable  in  a  fixed  quantity 
of  gold. 

It  was  an  original  New  Yorker  also  who  came  to  the 
head  of  the  Treasury,  after  the  erratic  five  years  of  Leslie 
M.  Shaw,  and  held  the  rudder  firm  during  the  crisis  of  1907. 
This  son  of  New  York,  George  Bruce  Cortelyou,  was  a 
product  of  the  city  schools  and  a  striking  example  of  what 
an  American  can  accomplish  by  his  own  unaided  abilities. 
Picked  out  as  stenographer  to  President  Cleveland  for 
merit,  made  Private  Secretary  to  President  McKinley  and 
successively  the  first  head  of  the  Department  of  Commerce 
and  Labor,Chairman  of  the  Republican  National  Committee, 
and  in  1907  Secretary  of  the  Treasury,  Mr.  Cortelyou  rose 
on  every  occasion  to  the  level  of  his  duties  and  oppor- 
tunities, and  when  the  crisis  of  October,  1907,  broke  out, 
New  York  financiers  knew  that  they  could  rely  upon  cool 
judgment  and  effective  cooperation  from  the  new  head  of 
the  Treasury. 

In  the  office  of  Comptroller  of  the  Currency  served 
strong  men  who  eventually  became  New  Yorkers,  even  if  they 
were  not  at  the  time  of  their  appointment  residents  of  the 
State.     Foremost  among  these  was  John  J.  Knox,  Comp- 


NEW  YORK  AND  NATIONAL  FINANCE  141 

troller  from  1872  to  1884,  whose  name  was  forever  anathema 
among  the  silver  men  because  he  framed  the  careful  revision 
of  the  statutes  discontinuing  the  coinage  of  the  silver 
dollar,  which  they  were  pleased  to  denominate  "The  Crime 
of  1873."  To  the  constructive  genius  of  Mr.  Knox  the 
country  owes  not  merely  the  codification  of  the  coinage 
laws,  but  many  improvements  in  the  administration  of  the 
National  Banking  Act.  The  successor  of  Mr.  Knox  was 
Mr.  Henry  W.  Cannon,  who  was  soon  called  to  the  presi- 
dency of  the  Chase  National  Bank,  which  he  relinquished 
only  when  ill  health  followed  his  exacting  labors.  Then 
came  Mr.  A.  Barton  Hepburn,  a  native  New  Yorker,  who 
had  won  his  spurs  as  Superintendent  of  Banking  in  the  State 
and  as  one  of  the  national  bank  examiners.  Mr.  Hepburn 
was  too  valuable  a  man  to  remain  long  in  government  office, 
and  after  serving  for  a  time  as  Vice-President  of  the  National 
City  Bank,  he  succeeded  Mr.  Cannon  in  1905  as  President  of 
the  Chase  National  Bank  and  ultimately  became  President  of 
the  Clearing  House  and  the  Chamber  of  Commerce.  During 
all  the  years  of  his  service  in  New  York,  however,  Mr. 
Hepburn  was  an  active  worker  for  sound  money.  He  was 
an  officer  of  the  Sound  Money  League,  which  contributed 
powerfully  to  the  election  of  President  McKinley  and  the 
enactment  of  the  Gold  Standard  Law.  Finally,  when  the 
battle  had  been  won,  he  rendered  an  important  service  to 
the  literature  of  finance  by  his  work  entitled  The  Movement 
for  Sound  Money.  Mr.  Hepburn's  service  as  Comptroller 
ended  in  1893,  after  which  the  place  was  held  by  three 
Western  men  for  fifteen  years,  but  finally  the  pendulum 
swung  back  to  New  York  in  the  appointment  in  1908  of 
Lawrence  O.  Murray,  under  whom  many  important  ad- 
vances were  made  in  methods  of  bank  examination  and 
in  the  administration  of  the  Comptroller's  Office. 

The  battle  which  resulted  in  the  enactment  of  the  Gold 


142  PROGRESS  OF  THE   EMPIRE   STATE 

Standard  Law  of  1900  was  initiated  by  Mr.  Hugh  H.  Hanna 
of  Indianapolis,  but  found  always  its  strongest  support  in 
the  business  community  of  New  York.  It  was  from  New 
York  that  Mr.  Hanna  took  for  members  of  the  Monetary 
Commission  Charles  S.  Fairchild,  who  had  proved  his 
mettle  as  Secretary  of  the  Treasury,  and  Stuyvesant  Fish, 
the  broad-minded  railroad  man  who  had  made  the  Illinois 
Central  a  part  of  the  domestic  life  and  progress  of  the 
Mississippi  Valley.  It  was  still  another  New  Yorker,  L. 
Carroll  Root,  who  assisted  in  perfecting  the  report  of  the 
Monetary  Commission,  which  remains  to-day  one  of  the 
most  clear  and  forcible  presentations  of  the  monetary 
and  banking  problem  in  the  United  States. 

When  the  work  of  this  commission  came  before  Congress, 
a  New  Yorker  was  one  of  a  subcommittee  of  three  who 
prepared  the  draft  of  a  measure  adapted  to  conditions  in 
the  House  of  Representatives  for  bringing  order  into  the 
monetary  and  banking  system.  This  man  was  John  Murray 
Mitchell,  a  young  lawyer  of  much  strength  of  character, 
who  in  1894  as  a  Republican  carried  a  Democratic  district 
for  the  first  time  in  its  history.  Again  elected  in  1896  on 
the  crest  of  the  wave  against  free  silver,  Mr.  Mitchell  took 
a  keen  interest  in  putting  into  law  what  his  city  and  State 
had  decreed  by  such  an  overwhelming  majority.  In  his 
handsome  house  at  Nineteenth  and  I  Streets,  in  Washington, 
graced  by  his  young  bride  of  a  year,  the  three  members  of 
the  subcommittee  worked  over  the  details  of  the  McCleary 
bill,  named  for  the  chairman  of  the  committee,  which 
became  one  of  the  steps  in  the  evolution  of  the  Gold 
Standard  Law  of  1900. 

The  enactment  of  the  law  came  finally  through  the 
appointment  of  a  special  committee,  representing  the 
Republicans  of  the  House  of  Representatives,  which  met  at 
Atlantic  City  in  April,  1899.     This  committee  was  not  made 


J 


IRVING  T.  BUSH 

Capitalist  and  terminal  export;  bom  in  Ridgeway,  Lenawee 
v,  Mich.,  July  12,  1869;  son  of  Rufus  T.  and  Sara  M. 
(Hall)  Hush;  educated  at  the  Hill  School,  Pottstown,  Va.  Presi- 
dent of  the  Bush  Terminal  Co.,  which  has  done  much  for  solving 
the  problem  of  freight  congestion  in  New  York;  director  of  the 
Bush  Terminal  Co.,  Bush  Land  Co.,  Bush  Terminal  Railroad,  and 
member  advisory  board  of  the  Title  Guarantee  &  Trust  Co. 
Mr.  Bush  is  a  member  of  the  Merchants'  Association  and  the 
Chamber  of  Commerce  and  has  taken  an  active  part  in  the 
movement  to  secure  the  reform  of  the  currency  system,  having 
been  chairman  of  a  committee  of  the  Merchants'  Association  on 
this  subject  and  an  officer  of  the  National  Citizens'  League  for  the 
promotion  of  a  sound  banking  system.  -In  pursuit  of  this  work 
he  has  made  several  public  addresses  and  appeared  before  com- 
mittees of  Congress.  He  is  a  member  of  the  Union  League,  New 
York  Yacht,  Downtown  Association,  and  other  clubs. 


NEW  YORK  AND  NATIONAL  FINANCE  H3 

up  from  members  of  the  banking  or  coinage  committees  of 
the  House,  but  of  the  representative  leaders  of  the  party. 
Among  them  appeared  Sereno  E.  Payne,  Chairman  of  the 
Committee  on  Ways  and  Means,  representing  one  of  those 
up-country  districts  of  New  York  where  the  follies  of  paper 
and  silver  inflation  had  scarcely  a  mouthpiece. 

It  was  from  the  labors  of  this  committee,  with  those  of 
the  Senate  Committee  on  Finance,  that  finally  emerged  the 
law  of  1900,  one  of  the  most  important  acts  in  the  financial 
history  of  the  country.  It  is  not  necessary  here  to  give  the 
details  of  the  act, except  to  say  that  it  made  gold  unques- 
tionably the  standard  of  value  in  the  United  States,  estab- 
lishing a  permanent  gold  reserve  of  #150,000,000  for  the 
redemption  of  the  greenbacks,  and  distinctly  providing  that 
this  fund,  if  impaired,  was  to  be  restored  by  the  prompt 
sale  of  bonds  and  was  in  no  case  to  be  applied  to  current 
expenditures,  as  had  been  done  with  the  gold  reserve  during 
the  trying  period  of  1894.  The  fact  that  the  law  was  finally 
passed  in  a  form  satisfactory  and  definite  in  these  respects 
was  due  very  largely  to  the  constant  watchfulness  of  Mr. 
Hanna  and  the  experts  associated  with  him  on  the  Indian- 
apolis Committee.  The  passage  of  the  act  opened  a  new 
era  in  the  history  of  the  American  money  market  and  made 
it  practicable  to  carry  on  exchange  operations  with  European 
financial  centers  upon  a  much  broader  scale  than  had  been 
possible  while  there  was  doubt  whether  New  York  was  a 
free  market  for  gold. 

The  enactment  of  the  Gold  Standard  Law  was  regarded, 
however,  by  the  banking  interests  of  New  York  as  only  a 
step  towards  the  final  restoration  of  the  currency  to  sound 
conditions.  The  Indianapolis  Monetary  Commission,  the 
Sound  Money  League,  and  other  organizations,  did  not 
relax  their  efforts  to  secure  a  change  in  the  basis  of  bank-note 
circulation,    which    should    give   greater   elasticity    to    the 


144  PROGRESS  OF  THE   EMPIRE   STATE 

currency  and  adapt  it  to  the  growing  needs  of  commerce. 
Lyman  J.  Gage,  as  Secretary  of  the  Treasury,  strongly 
seconded  in  his  annual  reports  the  wishes  of  the  business 
community.  Many  bills  were  introduced  into  Congress, 
and  several  reports  were  made  looking  to  an  improvement 
in  the  existing  system.  The  prosperity  of  the  country 
during  the  period  from  1900  to  1905  diminished  somewhat 
the  pressure  for  new  legislation.  In  the  autumn  of  1905, 
however,  call  rates  for  money  in  New  York  reached  an  alti- 
tude of  125  per  cent.  Mr.  Jacob  H.  Schiff,  a  well-known 
international  banker,  introduced  a  resolution  in  the  New 
York  Chamber  of  Commerce,  which  was  adopted  at  the 
December  meeting,  providing  for  the  appointment  of  a 
special  committee  of  the  Chamber  to  frame  a  currency 
measure.1  This  committee,  after  many  sessions  and  after 
conferences  by  one  of  the  members  with  the  heads  of  leading 
foreign  banks,  made  a  report  which  was  adopted  by  the 
Chamber  of  Commerce  on  November  1,  1906. 

This  report  constituted  something  of  a  landmark  in  the 
progress  of  monetary  discussion  by  making  the  first  recom- 
mendation coming  from  an  important  public  body  in  favor 
of  the  principle  of  a  central  bank  of  issue.  It  was  proposed 
that  such  a  bank  should  be  under  the  direct  control  of  a 
body  of  governors,  appointed,  at  least  in  part,  by  the  Presi- 
dent of  the  United  States,  and  that  it  should  perform  most 
of  the  essential  functions  of  note  issue  and  rediscount 
possessed  by  similar  institutions  in  Europe.  At  that  time, 
public  opinion  in  favor  of  a  central  bank  was  so  restricted 
that  an  alternative  plan  was  proposed  by  the  Committee, 
for  the  issue  of  notes  by  the  local  banks  upon  their  general 
assets,  with  the  security  of  a  safety  fund.' 

1  The  members  of  this  committee  were  John  Claflin,  Frank  A.  Vanderlip,  Isidor 
Straus,  Dumont  Clark,  and  Charles  A.  Conant. 

3  This  narrative  is  based  largely  upon  the  summary  of  the  measures  taken  to 


NEW  YORK  AND  NATIONAL  FINANCE  145 

Within  a  few  days  before  the  adoption  of  this  report  by 
the  Chamber  of  Commerce,  the  Annual  Convention  of  the 
American  Bankers'  Association  created  a  new  committee 
of  fifteen  members,  to  succeed  previous  committees  on  the 
subject,  for  the  purpose  of  framing  a  currency  measure  and 
consulting  with  representatives  of  the  Committee  of  the 
New  York  Chamber  of  Commerce  and  other  bodies.  This 
committee  met  in  Washington  in  November,  1906,  with 
the  Hon.  A.  Barton  Hepburn,  President  of  the  Chase 
National  Bank  of  New  York,  as  chairman.  A  plan  was 
prepared  which  did  not  differ  materially  in  principle  from 
that  of  the  New  York  Chamber  of  Commerce.  A  bill 
containing  some  of  the  features  of  this  plan  was  favorably 
reported  to  the  House  of  Representatives  by  the  Hon.  Charles 
N.  Fowler,  Chairman  of  the  House  Committee  on  Banking, 
who  had  long  been  an  advocate  of  the  currency  reform. 

At  the  Annual  Convention  of  the  American  Bankers' 
Association  held  at  Atlantic  City  in  September,  1907,  the 
report  of  this  committee  was  indorsed  by  a  large  majority 
and  the  Committee  was  directed  to  continue  its  functions 
and  to  make  such  modifications  in  its  plan  as  might  seem 
desirable.  Within  a  few  weeks  occurred  the  panic  of 
October,  1907,  the  almost  universal  suspension  of  currency 
payments  by  the  banks  of  the  United  States,  and  the  natural 
rise  of  foreign  exchange  several  points  above  gold  parity. 
Interest  was  stimulated  anew  in  the  subject  of  a  radical 
change  in  currency  conditions,  and  a  strong  report  was  made 
to  Congress  by  the  Hon.  W.  Barret  Ridgley,  the  Comp- 
troller of  the  Currency,  urging  the  principle  of  a  central 
bank.  The  same  method  of  meeting  future  panics  was 
recommended  by  others  who  had  made  a  special  study  of 
currency  matters.     In  spite  of  the  marked  growth  of  the 

secure  currency  reform  given  by  Conant,  A  History  of  Modern  Banks  of  Issue,  New 
York,  G.  P.  Putnam's  Sons,  1909,  pp.  437-447. 


146  PROGRESS  OF  THE   EMPIRE  STATE 

sentiment  for  central  banking  among  those  best  informed 
on  the  subject,  the  project  was  so  new  to  the  majority  of 
the  people  that  it  was  not  possible  to  secure  immediate 
action  of  so  radical  a  character  in  Congress.  The  necessity 
of  some  measure  to  avert  another  disgraceful  suspension 
of  currency  payments  in  time  of  peace  was  so  strongly 
impressed  upon  Congress,  however,  that  a  temporary 
measure  was  enacted,  to  expire  on  June  30,  1914,  to  permit 
special  issues  of  currency  by  the  banks  in  periods  of  stress. 

In  perfecting  this  emergency  measure  a  member  from 
New  York,  Mr.  Edward  B.  Vreeland  of  Salamanca,  took 
a  leading  part.  Mr.  Vreeland  was  not  at  the  time  Chairman 
of  the  Committee  on  Banking,  but  was  given  the  position 
in  the  next  Congress  because  of  his  active  interest  in  promot- 
ing currency  legislation  and  his  tact  in  reconciling  conflicting 
views.  The  bill  which  became  law  on  May  30,  1908,  was 
known  as  the  Aldrich-Vreeland  law,  from  Senator  Aldrich 
of  Rhode  Island,  Chairman  of  the  Finance  Committee,  and 
Mr.  Vreeland. 

More  worthy  of  consideration  with  a  view  to  the  future 
than  its  provisions  for  emergency  currency  were  the  final 
sections  of  the  law  of  1908,  which  authorized  the  appoint- 
ment of  a  National  Monetary  Commission  to  report  "what 
changes  are  necessary  or  desirable  in  the  monetary  system 
of  the  United  States."  This  commission  was  made  up  of 
nine  Senators  and  nine  members  of  the  House,  Senator 
Aldrich  and  Mr.  Vreeland  being  appointed  the  leading 
members.  It  has  been  largely  from  the  reports  of  this 
commission,  after  unbiased  investigations  of  European  sys- 
tems by  its  members,  that  the  movement  has  gained  such 
momentum  for  the  establishment  of  a  central  bank  of  issue 
in  the  United  States,  having  the  capacity  to  coordinate 
the  scattered  banking  units  of  the  country  into  an  efficient 
and  mutually  helpful  body. 


ALEXANDER  D.  NOYES 

ontclair,  \.  J.,  December  14,  1862; 
son< 

A-M"  l88'  Fork  Tribune,  18S3 

!'i;i1    stalT  ;er,    1884-1891; 

"nan>  1891 ;    trustee 

The  Forum  since 
'902;  has  Harvard  University,  Uni- 

>rk  Univei  Commerce 

ociation, 
:  ior  of  77n>/v  Fear*  0/.  1  merican  F,  ■ 
1S98;  Forty  Years  of  American  Finance,  1909.     Wrote:  77/c  Free 

ich  two  million  copies  were  circulal 
I896,  and  various  other  monographs  on  the  financial  question. 
In  charge  of  editorial  treatment  of  financial  and  economic  sub- 
in  the  Evening  Post  and  frequent  contributor  to  the  Atlantic 
Monthly  and  other  magazines. 


CHAPTER  V 

THE   ERA  OF   INDUSTRIAL   EXPANSION 

By  ALEXANDER  D.  NOYES 

THE  narrative  of  the  events  which  followed  the  year 
1896  makes  a  remarkable  chapter  in  American 
finance.  It  is  a  chapter  which,  so  far  as  regards 
its  general  tendencies,  may  possibly  be  said  merely  to  have 
repeated  history;  but  which,  when  judged  by  the  dramatic 
change  in  the  country's  financial  condition,  and  by  the 
portentous  character  of  the  phenomena  of  the  day,  stands 
quite  by  itself.  What  we  have  to  consider  in  our  review 
of  the  five  or  six  years  which  followed  1896  is  such  reversal 
of  its  position  by  the  United  States  that,  instead  of  the 
crippled  industrial  and  financial  state  of  1894,  with  the 
country's  principal  industries  declining,  its  great  corpora- 
tions drifting  into  bankruptcy,  and  its  Government  forced  to 
borrow  on  usurious  terms  from  Europe  to  maintain  the 
public  credit,  there  was  presented,  in  the  short  space  of  half 
a  dozen  years,  a  community  whose  prosperity  had  become 
the  wonder  of  the  outside  world;  whose  productive  indus- 
tries had  developed  such  strength  that  the  "American 
invasion"  was  discussed  abroad  as  threatening  ruin  to  our 
European  competitors;  whose  corporations,  when  properly 
capitalized  and  managed,  had  grown  so  profitable  that  the 

•This   chapter  is   based   in   part  on  the   author's     Forty   Years   of    American 
Finance,  with  the  kind  consent  of  the  publishers,  Messrs.  G.  P.  Putnam's  Sons. 

147 


148  progress  of  the  empire  state 

strongest  financial  interests  of  the  world  were  struggling 
to  buy  possession  of  them ;  whose  banking-houses  subscribed 
in  important  sums  to  new  English  and  German  Government 
loans,  not  to  mention  the  public  bond  issues — $100,000,000 
in  all,  within  seven  months — of  Cuba,  Japan,  and  Mexico. 
The  startling  ups  and  downs  of  fortune  which  have  occurred 
in  other  communities  are  familiar.  It  is,  however,  the 
fact  of  a  complete  revolution  in  this  country's  position,  not 
only  as  regards  its  own  enterprises,  but  in  its  relation  to 
other  industrial  states,  which  challenges  attention,  and  it 
is  this  which  we  shall  now  examine. 

It  is  a  popular  impression,  with  perhaps  the  majority 
of  people,  that  industrial  revival  was  immediate  and  con- 
tinuous after  the  election  of  November,  1896,  and  to  this 
belief  have  been  partly  traceable  some  singular  Stock  Ex- 
change phenomena  at  subsequent  elections.  The  belief  is 
erroneous.  That  the  defeat  of  the  free-coinage  demonstra- 
tion, at  what  was  apparently  the  psychological  moment 
promising  best  for  its  success,  was  an  event  of  great  import- 
ance in  the  country's  economic  history,  there  can  to-day 
be  little  doubt.  The  outcome  of  the  election  certainly  con- 
tributed to  the  later  return  of  full  financial  confidence  and 
industrial  activity.  But  confidence  and  industrial  activity 
were  by  no  means  an  immediate  sequel.  The  rise  in  stocks, 
which  had  begun  before  election,  lasted  barely  forty-eight 
hours  after  November  4th ;  then  heavy  realizing  sales  began, 
and  in  the  sequel,  financial  depression  prevailed  again  until 
far  into  1897.  During  November,  fully  700  manufacturing 
establishments  resumed  work  or  added  to  their  working 
force.  This  was  taken  as  reflecting  reassurance  in  the  busi- 
ness community  over  the  election  verdict  on  the  currency. 
But  the  rush  of  activity  ceased,  in  a  month  or  two,  as  sud- 
denly as  it  had  begun.  Instead  of  immediate  and  continuous 
revival,  the  first  half  of  1897  was  a  period  of  financial  uncer- 


THE  ERA  OF  INDUSTRIAL  EXPANSION  149 

tainty  and  depression.  The  first  half  of  1896  had  been 
regarded  as  hard  times;  yet  the  checks  drawn  on  all  the 
country's  banks  in  the  similar  period  of  1897  showed  de- 
crease of  $570,000,000,  or  2]/+  per  cent.  In  the  second 
quarter  of  1897,  liabilities  involved  in  commercial  failures 
throughout  the  country  were  $3 ,000,000  greater  than  in  1896. 
In  July,  1896,  there  had  been  in  blast  in  this  country  191 
iron  foundries,  with  a  weekly  output  of  180,500  tons,  and 
with  815,000  tons  piled  up  in  their  yards.  This  was  then 
called  a  very  unfavorable  showing;  yet  in  July,  1897,  the 
number  of  furnaces  in  blast  had  further  decreased  46,  to  145, 
weekly  output  had  fallen  16,000  tons,  to  164,000,  and  the 
idle  stock  of  iron  had  risen  nearly  200,000  tons,  to  1,004,000. 
All  such  considerations  were  soon  dismissed  from  the 
public  mind  of  1897,  by  a  turn  of  events  which  repeated,  on 
a  larger  scale  and  in  an  equally  extraordinary  way,  the 
story  of  1879.  Although  the  Indian  wheat  crop  failure  of 
1896  made  a  great  hole  in  the  world's  supplies  and  caused  an 
immediate  rise  in  the  price  of  wheat,  nevertheless  Europe 
itself  raised  in  that  year  a  crop  of  good  proportions.  What 
happened  in  1897  was,  first,  that  a  scorching  drought  in 
France  cut  down  the  season's  wheat  yield  in  that  country 
93,000,000  bushels  from  1896;  next,  that  a  wet  harvest 
reduced  the  Russian  crop  nearly  80,000,000  bushels;  and, 
finally,  that  a  season  of  storms  flooded  so  disastrously  the 
Danube  Valley  that  Austria  and  the  Balkan  States  gathered 
less  wheat  by  127,000,000  bushels  than  in  the  preceding 
year.  The  whole  European  crop  fell  below  the  yield  of  1896 
by  350,000,000  bushels, — a  loss  of  no  less  than  30  per  cent. 
Had  the  American  harvest  of  1897  remained  at  the  figures 
of  the  year  before,  a  great  disaster  would  have  befallen 
Europe.  This  country's  fortune  had,  however,  stood  it  in 
good  stead.  The  high  price  of  wheat  in  the  autumn  of  1896 
had  encouraged  farmers,  the  country  over,  to  plant  more 


150  PROGRESS  OF  THE   EMPIRE   STATE 

wheat  in  the  ensuing  spring.  This  increase  amounted  to 
nearly  five  million  acres.  Weather  conditions  in  the  United 
States  were  favorable  throughout  the  season.  The  resultant 
crop  ran  103,000,000  bushels  ahead  of  1896,  and  was,  with 
one  exception,  larger  than  any  previously  harvested. 

Under  the  circumstances,  it  was  sold  at  extraordinarily 
good  prices.  By  August  "dollar  wheat"  was  touched  again 
on  the  Chicago  Board  of  Trade,  for  the  first  time  since  1891 ; 
and  the  price  was  maintained  throughout  the  ensuing 
season.  At  this  price,  consuming  Europe,  with  its  supplies 
already  depleted  by  the  Indian  failure  of  the  year  before, 
bought  our  wheat  in  quantities  quite  unprecedented. 
During  the  twelve  months  after  the  harvest  of  1896  the 
United  States  exported,  in  grain  and  flour,  83,000,000 
bushels  of  wheat.  In  the  same  period,  after  the  1897 
harvest,  the  export  was  150,000,000.  The  value  of  the 
season's  exported  grain  increased  no  less  than  #122,000,000. 
One  result  of  this  notable  trade  incident  was  the  import, 
during  the  same  twelve  months,  of  #120,000,000  gold, — 
the  first  natural  movement  of  the  kind  in  this  direction 
since  the  autumn  of  1891.  Directly,  this  inflow  of  gold, 
which  was  lodged  with  the  Treasury  in  exchange  for  notes, 
caused  a  rise  in  the  Government's  gold  reserve  from  the 
#44,500,000  of  February,  1896,  and  the  #137,000,000  at 
the  end  of  1897,  to  the  handsome  figure  of  #245,000,000  in 
the  middle  of  1898. 

We  have  seen  how  the  export  of  our  wheat  to  famine- 
stricken  Europe  piled  up  our  export  trade  and  reversed  our 
situation  on  the  international  market.  The  wheat  was  the 
primary  influence;  but  scarcely  less  important  was  the 
revival  in  general  trade.  It  was  not  until  the  close  of  1897 
that  people  began  to  hear,  by  way  of  Europe,  of  "the  Ameri- 
can invasion."  This  matter  came  to  the  front  as  a  topic 
of  discussion,  in  a  remarkable  speech  delivered  at  Vienna, 


THE  ERA  OF  INDUSTRIAL  EXPANSION  151 

that  December,  by  the  Austrian  Minister  of  Foreign  Affairs, 
Count  Goluchowski.  It  was  asserted  in  this  speech  that 
"the  destructive  competition  with  trans-oceanic  countries 
required  prompt  and  counteracting  measures,  if  the  vital 
interests  of  the  European  people  are  not  to  be  greatly  com- 
promised." "European  nations,"  the  Austrian  statesman 
concluded,  "must  close  their  ranks  and  fight  shoulder  to 
shoulder,  in  order  successfully  to  defend  their  existence." 

Directed,  as  it  obviously  was,  at  the  United  States,  what 
did  this  singular  diatribe  mean  ?  Certainly,  neither  Austria 
nor  Europe  at  large  could  have  been  protesting  against  the 
"American  invasion"  of  Europe's  grain  market;  for  that, 
in  1897,  was  Europe's  only  alternative  to  famine.  It  did 
not  require  long  to  discover  that  Count  Goluchowski  had 
his  eye  on  our  export  of  manufactures.  The  volume  of 
these  exports  was  practically  stationary  in  the  eight  years 
between  1882  and  1890,  and  it  increased  very  slowly  after 
that.  In  the  hard  times  after  1894,  however,  when  there 
seemed  little  hope  in  a  domestic  market,  our  manufacturers 
began  to  look  abroad.  As  we  have  seen  in  noticing  the  iron 
trade  figures,  even  as  late  as  1897,  great  stocks  of  unsold 
goods  had  piled  up  after  every  effort  to  stimulate  home  pro- 
duction. But  we  have  learned  also  that,  while  our  own 
markets  were  passing  through  that  period  of  despondency, 
Europe's  were  reviving  rapidly;  by  1897,  their  recovery  had 
assumed  the  dimensions  of  a  "boom." 

It  has  been  shown  what  was  our  own  manufacturers' 
position.  Prices  were  low,  wages  were  low,  material  was 
abundant,  the  struggle  for  profits  had  sharpened  the  eye 
for  improvements  and  economies.  The  one  thing  needed 
was  an  expanding  market.  At  home  there  was  none  as  yet; 
but  here,  in  foreign  States,  had  suddenly  arisen  a  demand  for 
manufactured  goods  so  urgent  that  at  the  moment  English 
and  German  manufacturers  could  hardly  fill  it.     Our  people 


152  PROGRESS  OF  THE   EMPIRE   STATE 

would  scarcely  have  shown  themselves  possessed  of  Yankee 
shrewdness  had  they  neglected  the  opportunity;  and  they 
did  not  neglect  it.  They  were,  in  fact,  in  a  peculiarly 
favorable  situation  to  take  advantage  of  it.  The  raw 
material  lay  almost  at  the  doors  of  the  factories.  Skilled 
laborers,  chafing  after  their  four-year  period  of  partial 
idleness,  could  be  had  at  once  and  in  quite  sufficient  number, 
and  orders  from  home  consumers  were  so  light  that  scarcely 
half  the  producing  capacity  of  well-equipped  mills  was 
being  used  for  the  domestic  trade.  Our  manufacturers 
took  foreign  orders  for  prompt  delivery  which  the  English 
and  German  mills  were  simply  unable  to  accept.  We  sold 
our  goods,  not  only  in  the  so-called  neutral  markets,  but 
in  the  markets  of  Continental  Europe.  The  result  was  that, 
between  1893  and  1899,  our  export  of  manufactures  actually 
doubled.  They  were  $158,000,000  in  the  one  year,  and 
$339,000,000  in  the  other;  and  they  increased  a  hundred 
million  more  in  the  fiscal  year  1900.  It  is  easy  to  see  why, 
under  such  conditions,  our  total  export  trade,  crossing  the 
billion-dollar  mark  in  the  fiscal  year  1897,  should  have 
risen  to  $1,200,000,000  in  1898,  to  nearly  $1,400,000,000  in 
1900,  and  to  not  quite  $1,500,000,000  in  1901.  Stimulated 
by  this  great  outside  demand,  our  trade  activity  and  our 
industrial  profits  rose  to  extraordinary  figures. 

The  first  task  of  this  era  of  returning  prosperity  was  the 
task  of  financial  reconstruction.  After  the  panic  of  1893, 
not  only  was  61  per  cent,  of  the  outstanding  shares  of  Ameri- 
can railways  receiving  no  dividend  whatever,  but  one  fourth 
of  that  stock  represented  roads  in  the  hands  of  bankruptcy 
courts.  As  late  as  the  middle  of  1895  receivers  were  opera- 
ting 169  railways,  with  37,855  miles  of  track — more  than  one 
fifth  of  the  country's  total  railway  mileage,  and  represented 
on  the  markets  by  no  less  than  $2,400,000,000  stocks  and 
bonds. 


MEYER  GUGGENHEIM 

Was   the   founder  of   the   Guggenheim   fortune   in    Ami 

from  Switzerland,  where  the  family 
me  of  the  first  I  sh  famUiei  !  there 

in  the  early  days  of  'ian  Republic:     Bi 

in  mines  in  Leadvilli  '  was  thereby  drawn  into  the  mining 

and  smelting  b  which  he  ultimately  brou] 

Gave  all  his  sons  a  practical  bus  n  under  his 

immediate   direction.     Became  interested   in  mining  in   Mexico 
and    formed    ultimately    the   firm    of    M.    I 
Retired  from  active  business,  and  died  in  1905. 


THE  ERA  OF  INDUSTRIAL  EXPANSION  153 

In  the  hard  times  of  1894,  no  rehabilitation  of  these 
wrecked  corporations  was  possible;  the  achievement  called 
for  abundant  confidence  and  abundant  capital;  and  it  was 
only  with  the  returning  sign  of  promise  in  the  next  three 
years  that  substantial  progress  was  made.  In  December, 
1895,  the  Erie  was  taken  out  of  the  receivers'  hands;  in  the 
same  month,  the  Atchison,  Topeka  &  Santa  Fe  emerged 
from  bankruptcy;  in  September,  1896,  the  Philadelphia 
&  Reading  was  placed  on  its  feet.  Foreclosure  was  in  each 
case  followed  by  purchase  of  the  properties  in  behalf  of 
former  shareholders,  who,  as  a  condition  to  their  partici- 
pation in  the  new  company,  were  assessed  pro  rata  to  raise 
the  needed  cash  resources,  the  bondholders  submitting 
to  lower  interest  rates,  usually  receiving  stock  in  the  new 
corporation  as  a  solace. 

Naturally,  this  process  of  rehabilitation  grew  more  gen- 
eral as  the  return  of  prosperity  became  assured.  In  1893, 
railways  with  #1,781,000,000  stock  and  bonds  were  placed 
in  receivers'  hands;  in  1896,  railways  with  $1,150,377,000 
were  sold  under  foreclosure;  for  each  process,  these  were 
totals  exceeding  by  nearly  a  billion  dollars  those  of  any  other 
year  on  record.  But  as  against  the  169  insolvent  railroads 
of  1895,  with  37,856  miles  of  track  and  $2,439,000,000 
capital  liabilities,  existing  receiverships  in  the  middle 
of  1898  covered  only  94  roads,  with  a  mileage  of  12,745 
and  a  capital  of  $661,500,000,  and  in  1900  only  52  roads, 
with  mileage  of  4178  and  capital  of  $351,000,000.  By 
1900,  net  earnings  of  all  American  railways  had  increased  50 
per  cent,  over  1895,  and  actual  dividends  paid  out  were 
nearly  doubled. 

This  expansion  of  financial  and  industrial  activity  had 
presently  to  endure  some  rather  crucial  tests.  The  United 
States  declared  war  against  Spain  in  April,  1898,  and  this 
for  a  month  upset  all  financial  markets.     Our  situation  on 


154  PROGRESS  OF  THE   EMPIRE   STATE 

international  exchange,  however,  was  so  strong  that  the 
very  first  thing  the  country  did,  even  before  war  had 
been  declared,  was  to  draw  #60,000,000  gold  from  Europe 
to  protect  its  bank  position.  The  war  was  quickly  over. 
Admiral  Dewey  destroyed  the  Spanish  fleet  at  Manila  on 
the  first  of  May;  Cervera's  fleet  was  annihilated  July  3d, 
outside  Santiago  harbor;  on  July  26th,  Spain  asked  for 
terms,  and  on  August  12th,  the  protocol  to  the  treaty  of 
peace  was  signed.  In  several  ways,  the  war  served  to 
demonstrate  the  new  financial  resources  of  the  country. 
A  #200,000,000  3  per  cent,  war  loan,  offered  at  par  to  inves- 
tors in  July,  elicited  subscriptions  for  #1,500,000,000;  it 
was  taken  by  home  subscribers,  the  separate  allotments 
numbering  320,000,  and  it  went  to  a  premium  of  6  per  cent, 
within  three  months.  In  April,  1899,  our  Government 
paid  Spain  a  #20,000,000  indemnity  for  the  Philippines, 
and  the  #20,000,000  export  of  gold,  caused  by  the  operation 
in  exchange,  did  not  prevent  a  continuous  increase  in  the 
Treasury's  own  gold  reserve. 

Partly  in  connection  with  the  war,  wheat  went  to  a 
price — #1.85  per  bushel  at  Chicago,  on  May  10th — never 
but  once  exceeded  in  the  thirty  preceding  years.  This  was 
a  corner,  which  broke  down  as  corners  usually  do;  but  it 
was  unlike  many  corners,  in  that  it  occurred  when  the 
American  farmer  still  had  plenty  of  wheat  to  sell,  and  when 
he  received  the  benefit  of  the  corner  prices.  Our  wheat  crop 
of  1897  was  the  second  largest  ever  harvested  in  this  country. 
The  crop  of  1898  exceeded  all  precedent,  and  that  of  1901 
was  10  per  cent,  larger  still.  In  the  fiscal  year  1893  our 
imports  exceeded  exports  by  #18,700,000.  In  1897  the 
excess  of  exports  was  #286,000,000.  The  next  year  it  was 
#615,000,000. 

This  abnormal  accumulation  of  foreign  credits  had  some 
strange   results.     First,   the   pressure  of  domestic  capital 


THE  ERA  OF  INDUSTRIAL  EXPANSION  155 

on  our  home  investment  markets  raised  prices  to  unexpected 
heights.  As  a  result,  foreign  holders  of  our  securities  sold 
them  back;  and  Europe  was  practically  drained  of  Ameri- 
can stocks  and  bonds.  Then,  for  the  first  time  in  our 
history,  we  began  to  lend  to  Europe.  President  Kriiger 
of  the  Transvaal  Republic  declared  war  on  England  in 
October,  1899.  Transvaal  mines  had  in  1898  produced 
$75,000,000  gold — more  than  one  fourth  of  the  whole 
world's  output  of  the  year — and  exactly  that  amount  was 
received  in  London,  from  South  Africa,  during  1899.  But 
with  hostilities  begun  and  the  Transvaal  frontier  blockaded, 
production  sank  at  once  to  insignificant  proportions;  then, 
when  the  Boer  authorities  placed  an  embargo  on  the 
mines,  it  ceased  entirely.  From  April,  1900,  to  April,  1901, 
inclusive,  scarcely  an  ounce  of  gold  was  mined  in  the 
Transvaal,  and  in  the  whole  year  1900,  England  received 
only  $1,800,000  gold  from  South  Africa;  less  by  $7,000,000 
than  the  sum  which  it  had  to  export  to  the  banks  of  Cape 
Colony.  As  a  consequence  of  this  sudden  curtailment 
of  supplies,  coming  with  trade  and  speculation  abnormally 
active  throughout  Europe,  the  great  state  banks  began  to 
bid  for  gold.  The  Bank  of  England's  official  discount 
rate  went  in  December,  1899,  to  6  per  cent.,  a  height  not 
reached  since  the  panic  of  1890;  the  Imperial  Bank  of 
Germany  fixed  7  per  cent.,  the  highest  rate  in  its  history. 

In  the  face  of  this  confusion  of  the  markets,  and  of 
several  defeats  which  foreshadowed  a  long  campaign,  Eng- 
land placed  its  war  loans.  Before  the  war  was  ended— and 
that  was  not  until  May  31,  1902 — England  had  issued 
$795,000,000  in  new  government  securities;  the  whole 
cost  to  England  of  this  little  conflict  was  no  less  than 
$1,085,000,000 — or,  since  the  fighting  lasted  two  years 
and  nine  months,  almost  exactly  one  million  dollars  per 
day.     Inevitably,  the  collapse  in  foreign  markets,  at  the 


156  PROGRESS  OF  THE   EMPIRE  STATE 

end  of  1899,  disconcerted  our  own  financial  markets  also; 
London's  panicky  recall  of  capital  from  New  York  sent 
the  Wall  Street  call-money  rate  up  to  186  per  cent,  on 
December  18th.  Yet  it  was  in  this  very  situation  that  the 
American  market  came  to  Europe's  relief.  New  York  took 
$28,000,000  of  the  British  Exchequer  loan  of  August,  1900; 
applied  for  $150,000,000  of  the  loan  of  May,  1901,  and 
secured  $100,000,000;  it  subscribed  for  $80,000,000,  or 
one  half  of  the  loan  of  April,  1902.  In  two  of  these 
loans,  American  banking  houses  dealt  directly  with  the 
British  Exchequer,  something  wholly  new  in  financial  his- 
tory. These  were  not  all  our  foreign  investments  of  the 
period.  The  German  Government  sold  us  $20,000,000  of 
its  new  bonds  in  1900,  and  we  lent  some  $10,000,000  more 
to  Continental  cities.  Yet  the  "foreign  balance"  con- 
tinued to  accumulate.  At  the  close  of  1900  it  was  esti- 
mated by  international  bankers  that  this  country  still  had 
a  credit  fund  of  at  least  $200,000,000  outstanding  on 
Europe's  money  markets. 

It  was  a  very  common  query  at  that  time,  in  financial 
circles,  what  was  to  be  the  outcome  of  this  unprecedented 
situation.  Some  people  predicted  that  it  would  mean  in- 
vestment of  our  overflowing  capital,  on  a  rapidly  increasing 
scale,  in  foreign  enterprises.  It  was  then  that  the  prophecy 
was  heard  that  New  York  was  destined  to  displace  London, 
if  it  had  not  already  displaced  it,  as  the  financial  center 
of  the  world.  On  the  other  hand,  the  Wall  Street  com- 
munity, which  took  the  speculator's  view,  predicted  that 
the  price  of  outstanding  American  securities,  under  this 
pressure  for  investment,  would  rise  to  unheard-of  heights. 
Neither  of  these  things  happened  exactly  as  was  predicted, 
but  what  did  happen  was,  as  we  shall  presently  see,  quite 
as  startling  as  either  of  them. 

The  situation  in  which  the  American  community  found 


THE  ERA  OF  INDUSTRIAL  EXPANSION  157 

itself,  in  1901,  was  one  which  arises  at  intervals  in  all  pros- 
perous modern  states;  but  its  characteristics  were  empha- 
sized, on  this  occasion,  by  the  unusual  incidents  of  the 
period.  Such  a  situation  has  invariably,  on  all  previous 
occasions,  resulted,  first  in  readiness  of  people  at  large  to 
embark,  in  all  sorts  of  enterprises,  the  wealth  whose  extent 
they  have  suddenly  come  to  realize,  and  next  in  a  rush  to 
speculation. 

I  have  shown  to  what  extent  the  prosperity  of  the  United 
States,  and  its  rapid  accumulation  of  new  capital,  had  pro- 
gressed. We  have  seen  how  this  capital,  gathering  confidence 
and  pressing  on  all  investment  markets,  had  not  only  raised 
prices  of  our  own  securities  to  unexpected  heights,  and 
bought  back  from  Europe  the  bulk  of  American  investments 
in  foreigners'  hands,  but  had  overflowed  into  such  quarters 
as  British  consols  and  German  Treasury  bonds.  But  after 
all  this,  a  huge  credit  fund  was  still  left  uninvested  on  home 
and  foreign  markets.  At  such  times,  people  always  wonder 
what  is  to  be  the  outcome,  and  the  outcome  is  always  the 
same.  The  public  has  the  money,  and  is  eager  to  invest  it; 
the  banking  community  provides  new  securities  as  a  field 
for  such  investment.  These  securities  may  be  good  or  bad, 
sound  or  fraudulent.  They  may  be  new  enterprises  or  old 
enterprises  recapitalized.  All  of  these  applicants  appeared 
on  the  scene  in  1899  and  1900.  But  the  great  banking 
houses,  with  their  hand  on  the  public  pulse,  concluded  that 
this  was  a  mere  trifling  with  the  resources  at  command. 
The  reservoir  of  American  capital  seemed  inexhaustible;  it 
filled  up  on  one  side  faster  than  it  could  be  drained  into 
these  various  enterprises  on  the  other.  It  was  then  that  the 
scheme  of  recapitalizing  American  industry  was  conceived. 

Industrial  trusts  were  not  new  in  American  financial 
history.  But  the  movement  had  languished  after  1890; 
hard  times,  low  profits,  and  distrust  on  the  part  of  invest- 


158  PROGRESS  OF  THE   EMPIRE  STATE 

ment  capital  prevented  further  progress  between  1893  and 
1897;  the  financial  embarrassment  of  some  of  the  trusts 
already  in  existence  threw  doubt  on  other  propositions  of 
the  sort.  But  the  prosperous  trade,  abundant  capital,  and 
overflowing  confidence  which  prevailed  in  1899  nad  created 
a  new  situation.  The  promoter — a  name  which  now  grew 
suddenly  familiar  on  all  American  markets — asked  the 
owners  of  a  dozen  or  more  competing  plants,  in  a  given 
industry,  to  name  a  selling  price.  Naturally,  as  their  own 
retirement  from  business  was  involved,  the  price  the  owners 
fixed  was  high.  A  banking  syndicate  would  be  formed, 
however,  to  provide  the  money  requisite  for  the  purchase 
and  for  a  handsome  payment  to  the  middleman.  Thus 
acquired,  the  manufacturing  plants  would  be  combined  and 
incorporated. 

As  it  turned  out,  and  as  the  bankers  had  expected,  the 
public  was  in  exactly  the  mood  to  respond  to  the  invitation. 
The  shares  were  readily  absorbed;  other  combinations 
followed.  Still,  the  investment  fund  showed  no  symptoms 
of  exhaustion.  Presently  the  more  venturesome  spirits 
among  promoters  began  to  combine  these  already  large 
industrial  combinations  into  a  single  company,  and  to  sell 
the  stock  of  that,  at  inflated  valuations,  to  the  public. 
This  would  have  been  a  step  too  far,  but  for  the  fact  that 
profits  of  manufacture,  notably  in  the  steel  and  iron  trade, 
went  on  increasing  faster  than  promoters  could  turn  their 
expectations  into  stock. 

How  far  this  movement  of  incorporation  went  may  be 
judged  from  the  following  figures.  In  the  first  three  months 
of  1899  new  industrial  companies,  with  a  total  capitalization 
of  no  less  than  $1,586,000,000,  were  incorporated  in  this 
country.  During  the  full  year  1899  the  total  rose  to 
$3,593,000,000,  of  which  respectable  sum  $2,354,000,000 
was  the  common  stock,  which,  by  frank  confession  of  pro- 


f&uJi/^ 


STUYVESANT   FISH 

Hanker  and  railway  ofl  „  in  Ncw  y    . 

If    SmSSSS 

Co    at  London,  becoming  later  managing  clerk-  March    6     x,f 
darted  director  Illinois  Central  RailroS^^rvT^  f^  7J 

president-  April    2     rSS,     „:  ;  Januar>' 7,  1883,  second 

<-,  April  2,  i884i  vice-president:  Mav  18    rxs-   * 

=  l#   ssa 

corporafcoos;  ,„««  Mutual  Lilc  ,         '       ^°'°'  °'h" 


THE  ERA  OF  INDUSTRIAL  EXPANSION  159 

moters,  then  and  afterward,  was  simply  "water.  "  We  have 
already  seen,  however,  how  seriously  the  investing  public 
took  even  these  common  shares.  They  did,  in  fact,  show 
particular  favor  to  them,  for  the  reason  that  the  relatively 
lower  price  of  common  shares  roused  the  bargain-counter 
instinct.  Furthermore,  in  the  immense  industrial  expan- 
sion of  the  period,  these  very  common  stocks,  representing 
the  inflated  capitalization  of  concerns  which  in  not  a  few 
cases  had  been  bankrupt  four  or  five  years  before,  were  very 
generally  receiving  dividends. 

For  it  was  not  only  true  that  individuals,  in  the  flush 
of  material  prosperity,  were  buying  necessities  and  luxuries 
with  increased  freedom.  Even  in  this  direction  there  was 
a  general  tendency  which  approached  extravagance.  But 
a  still  more  powerful  demand  came  from  the  industries 
themselves.  Iron,  for  instance,  which  had  sold  for  #15.45 
per  ton  in  the  autumn  of  1894,  brought  $29.50  at  the  close 
of  1899;  that  is  to  say,  its  price  had  nearly  doubled,  and 
such  a  market  necessarily  brought  about  construction  of 
new  plants  and  enlargement  of  those  already  in  the  field. 
Iron  for  such  construction  was  bought  from  existing  mills. 
The  same  stimulus  ran  through  every  other  trade.  An 
extremely  large  demand  for  new  material  came  from  rail- 
ways, which  had  to  carry  the  produce  of  the  farmers  to  the 
coast.  Naturally,  after  four  years  of  rigid  cutting  of  ex- 
penses under  receivers  in  bankruptcy,  the  companies  were 
in  no  condition  to  handle  easily  this  enormous  trade  in  1897, 
and,  as  their  profits  and  credit  went  on  rising,  after  the 
readjustment  of  their  financial  status,  their  task  was  physi- 
cal reconstruction  of  the  properties.  What  they  spent  on 
this,  as  compared  with  three  or  four  years  before,  may  be 
judged  from  the  new  railway  securities  which  were  sold  in 
the  investment  markets  to  procure  the  money.  In  1898  they 
put  out  $67,000,000  worth  of  stock  and  bonds,  mostly  for 


i6o 


PROGRESS  OF  THE   EMPIRE  STATE 


such  purposes;  in  1899,  #107,000,000;  in  1900,  #199,000,000; 
in  1901,  #434,000,000;  and,  in  1902,  #527,000,000. 

That  industry  and  finance  halted  in  1900,  under  the 
double  influence  of  the  collapse  of  the  foreign  market  for 
our  exports  and  the  vicissitudes  of  the  presidential  campaign, 
was  entirely  natural.  But  the  country's  real  prosperity, 
its  accumulation  of  fresh  capital,  had  not  been  arrested  even 
momentarily.  News  of  the  final  defeat  of  the  free-silver 
coinage  movement,  in  the  November  elections  of  1900,  found 
its  immediate  reflection  on  the  Stock  Exchange;  it  was  the 
political  side  of  things  which  served  to  fire  the  imagination, 
already  brought  to  a  pitch  of  no  little  excitement  by  the  spec- 
tacle of  the  country's  enormous  economic  power.  From  this 
mixture  of  causes  followed  very  rapidly  what  may  be  de- 
scribed as  the  explosion  of  speculation  at  the  beginning  of 
1901, — a  period  which  will  possibly  have  as  conspicuous  a 
place  in  the  curious  reminiscences  of  finance  as  the  South  Sea 
Bubble  of  1720  and  the  railway  craze  of  1844.  Its  underly- 
ing causes  were,  indeed,  identical  with  the  causes  of  those 
older  episodes ;  the  principal  phenomena  of  each  were  the  im- 
mense amount  of  new  stock  issued,  the  eagerness  of  the  public 
to  buy  it,  and  the  rapidity  with  which  people  who  bought 
found  the  value  of  their  holdings  rising.  The  situation  of 
1901  was  one  which  turned  men's  heads.  The  country 
seemed  to  have  reached  a  pinnacle  of  prosperity  from  which 
nothing  could  dislodge  it.  The  profits  of  our  incorporated 
enterprises  seemed  to  have  no  assignable  limit.  American 
capital  pressed  upon  every  avenue  of  investment.  The  most 
reckless  and  foolish  speculation  was  apt  to  achieve  success. 
Looking  at  the  matter  philosophically,  there  need  be  no 
wonder  that  the  word  went  forth,  in  financial  circles  previ- 
ously noted  for  conservatism,  that  old  precedents  of  finance 
were  obsolete,  that  it  was  no  longer  necessary  to  judge  the 
present  and  future  by  the  past. 


THE  ERA  OF  INDUSTRIAL  EXPANSION  161 

The  climax  of  this  great  speculation  came  from  a  pecu- 
liar cause,  which,  I  think,  we  shall  understand  in  the  light 
of  what  we  have  already  considered,  but  which"the  investing 
public  of  that  day  did  not  understand  at  all.  It  became 
evident,  at  the  close  of  1900,  that  something  more  than  buy- 
ing by  investors  was  at  work  in  the  Stock  Exchanges.  On 
one  stock  after  another,  a  buying  movement  would  converge 
which  seemed  to  be  utterly  indifferent  to  prices,  and  which 
was  accompanied  by  trading  of  quite  unexampled  volume. 
It  was  presently  evident  that  what  was  going  on  was  the 
purchase,  at  extravagant  prices,  of  a  controlling  interest  in 
the  shares  of  railway  and  industrial  companies.  The  public 
inferred,  from  what  it  saw,  that  these  purchases  were  being 
made  on  their  own  account  by  men  of  boundless  wealth, 
who  were  merely  investing  their  private  capital.  Such  a 
supposition  naturally  drew  the  investing  public  into  the 
whirl  of  speculation :  first,  in  order  to  make  its  own  invest- 
ments before  prices  should  go  beyond  its  reach;  second,  in 
the  hope  of  selling  out  at  the  much  higher  prices  which  the 
rich  men's  purchases  were  expected  to  bring  about. 

But  the  public  was  mistaken  as  to  the  nature  of  the 
movement.  What  actually  was  happening  was  this.  People 
connected  with  one  corporation  would  borrow  large  sums 
of  money,  and  use  that  money  to  buy  up  shares  of  another 
subsidiary  or  competing  corporation.  They  were  buying, 
however,  not  for  themselves,  but  for  the  company  with 
which  they  were  identified;  and  their  purpose  was,  as  soon 
as  the  property  had  been  obtained,  to  hand  it  over,  issue 
new  stock  or  bonds  of  their  own  corporation,  sell  such  securi- 
ties to  the  public,  and  use  the  proceeds  to  reimburse  them- 
selves, with  a  handsome  bonus.  There  was  the  famous  case, 
for  instance,  of  the  Chicago,  Burlington  &  Quincy  Railway. 
This  company's  stock,  amounting  to  #110,000,000,  sold  at 
the  end  of  1900  for  #144  per  share,  which  was  considered  by 


1 62  PROGRESS  OF  THE   EMPIRE  STATE 

most  people  rather  high.  People  identified  with  the  North- 
ern Pacific  Railway  bought  up  the  stock  at  a  seemingly 
reckless  rate,  pushed  up  its  price  above  #180,  and  then 
announced  that  a  bond  would  be  issued  by  the  Northern 
Pacific  and  Great  Northern  companies  to  pay  #200  a  share 
for  the  whole  of  the  Burlington  stock.  These  bonds  were 
later  sold  on  the  open  market,  the  result,  of  course,  being 
that  the  supply  of  securities  on  the  market  was  increased  by 
some  #50,000,000. 

The  same  process  occurred  in  half  a  dozen  other  railways, 
the  usual  expedient  being  the  issue  of  what  was  now  called 
a  "collateral  trust  bond."  Stock  of  another  company — 
sometimes  all  of  it,  sometimes  a  bare  majority — was  bought 
for  a  corporation.  That  corporation  thereupon  issued 
bonds  for  the  cost  of  purchase;  but  those  bonds,  instead  of 
being,  like  other  mortgage  issues,  a  lien  on  the  franchise 
and  road-bed  of  the  issuing  company,  were  merely  secured 
by  pledge  of  the  stock  which  had  been  bought.  When  it 
was  found  that  the  public  readily  bought  these  bonds, 
the  device  was  followed  by  another,  not  altogether  new, 
but  never  before  applied  on  such  a  scale.  A  company 
would  be  chartered  for  no  definite  purpose  except  to  hold 
the  shares  of  other  companies.  Having  bought  up  these 
shares  or  acquired  them  through  exchange,  it  issued  its 
own  stock  to  foot  the  bill.  The  public  bought  this  stock, 
as  it  had  bought  the  collateral  trust  bonds,  and  there  seemed 
no  limit  to  the  scope  of  the  operation. 

It  was  during  this  period  that  Mr.  Morgan,  in  March, 
1901,  formed  his  "billion-dollar  steel  trust."  The  project 
met  with  remarkable  success.  Starting  on  the  curb  at  a 
price  of  38  for  "Steel  common,"  and  82^  for  the  7  per 
cent.  "Steel  preferred,"  the  Stock  Exchange  price  advanced 
in  a  month  to  55  and  101^  respectively.  Half  a  million 
of  the  shares  were  dealt  in  during  the  first  two  days  of  their 


THE  ERA  OF  INDUSTRIAL  EXPANSION  163 

appearance  on  the  Stock  Exchange;  the  next  week's  record 
was  a  million.  The  greater  part  of  this  was  doubtless 
merely  "matching  of  orders"  through  the  medium  of 
brokers,  but  the  public  did  not  know  this.  It  caught  the 
speculative  fever;  even  in  thrifty  Western  towns  and  New 
England  country  villages,  the  gossip  of  an  evening  was 
apt  to  concern  itself  with  "Steel."  So  successful  was  the 
operation  that  a  year  or  two  later  the  #25,000,000  "under- 
writing syndicate  "  received  back  in  cash  its  whole  sub- 
scription, plus  200  per  cent,  in  dividends. 

The  outburst  of  speculation  during  April,  1901,  was 
something  rarely  paralleled  in  the  history  of  speculative 
manias.  Not  only  did  the  younger  men  who  had  sold  out 
to  the  Steel  Corporation — now  made  into  many  times 
millionaires  overnight  and  bewildered  by  their  extraordinary 
fortune — toss  into  stock  market  ventures  the  money  which 
they  saw  no  other  way  of  using,  but  old  and  experienced 
capitalists  came  near  losing  their  heads,  asserted  publicly 
that  the  old  traditions  of  finance  no  longer  held  and  that  a 
new  order  of  things  must  now  be  reckoned  with,  and  joined 
the  dance.  The  "outside  public,"  meantime,  seemed  to 
lose  all  restraint.  A  stream  of  excited  customers,  of  every 
description,  brought  their  money  down  to  Wall  Street,  and 
spent  their  days  in  offices  near  the  Stock  Exchange.  Two  or 
three  years  before,  it  was  called  a  good  day's  business  when 
400,000  shares  of  stock  changed  hands  on  the  Exchange. 
In  April,  1901,  the  daily  record  rose  to  a  million  shares,  to 
two  million,  and  finally,  on  April  30th,  to  three  million  and 
a  quarter.  Estimating  the  average  price  of  stocks  at  that 
period  at  #60  per  share — an  inside  figure — it  will  be  seen 
that  the  3,200,000  shares  of  April  30th  meant  that  from 
some  quarter  #192,000,000  worth  of  stocks  was  bought. 
The  mere  posting  of  this  enormous  business  compelled 
commission  houses  to  keep  their  office  forces  working  into 


1 64 


PROGRESS  OF  THE   EMPIRE  STATE 


the  small  hours  of  the  night.  Execution  of  the  orders  on 
the  floor  of  the  Stock  Exchange,  under  the  prevalent  con- 
ditions of  excitement,  so  manifestly  threatened  physical 
breakdown  of  the  brokers  that  the  governing  committee 
took  the  quite  unprecedented  step  of  declaring  an  extra 
Stock  Exchange  holiday  to  give  the  membership  a  rest. 
The  newspapers  were  full  of  stories  of  hotel  waiters,  clerks 
in  business  offices,  even  doorkeepers  and  dressmakers,  who 
had  won  considerable  fortunes  in  their  speculations.  The 
effect  on  the  public  mind  may  be  imagined. 

While  this  was  going  on,  promoters  were  busy  with 
projects  as  daring,  in  their  way,  as  the  steel  amalgamation. 
The  phrase,  "thinking  in  hundred  millions,"  which  had  its 
origin  in  that  period,  fairly  describes  the  state  of  things. 
Bankers  in  high  standing  asked  and  received  commissions 
as  high  as  five  million  dollars  for  managing  some  of  these 
operations,  and  still  the  original  proprietors  who  sold  out 
to  the  combinations  received  prices  of  which  they  had  never 
dreamed.  The  bankers  who  had  successfully  carried  through 
the  steel  amalgamation  entered  new  fields  of  experiment. 
Starting  with  two  transatlantic  steamship  lines  which  were 
owned  by  American  investors,  they  undertook  to  merge  into 
one  huge  holding  company  all  the  competing  foreign  lines. 
The  German  companies,  after  some  tentative  negotiation, 
withdrew,  and  hasty  counter-propositions  by  the  British 
Government  caused  the  Cunard  Line  to  break  off  negotia- 
tions. When,  however,  control  of  such  old  English  enter- 
prises as  the  White  Star  and  Leyland  lines  was  secured, 
partly  for  cash  and  partly  through  the  #112,000,000  stock 
and  #50,000,000  bonds  of  the  International  Mercantile 
Marine,  an  angry  outcry  arose  in  England.  London  itself 
shared  in  the  notion,  which  the  American  press  and  public 
adopted  on  the  spot,  that  we  were  using  our  boundless 
resources  of  capital  to  snatch  away  Great  Britain's  suprem- 


THEODORE  PERRY  SHONTS 

Railway  and  trad  J;  bom  in  Cra  >unty,  Pa., 

May   5,    i<S5<>;   son    Dr.    Hen  nd    Margaret   Nevin 

(Marshall)  Shonts;  ancestry,  Dutch  and  Scotch-Irish;  went  with 
parents  in  boyhood,  to  Appanoose  County,  la.;  educated  in 
public  schools  of  Centerville,  la.,  and  at  Monmouth  Co 
Monmouth,  111.,  from  which  he  graduated  in  1876;  married  in 
rville,  la.,  1882,  Harriet  Amelia,  daughter  General  (after- 
ward Governor)  Francis  M.  Drake;  two  daughters:  Marguerite 
and  Theodora  (now  Duchesse  de  Chaulnes).  After  graduation, 
D  accountant,  and  was  employed  by  national  banks 
in  Iowa  to  standardize  and  simplify  methods  of  bookkeeping; 
studied,  law  and  practiced  a  short  time  at  Centerville,  la.;  became 
with  General  Drake,  who  had  large  financial  and 
railroad  interests,  and  who  placed  in  his  hands  much  of  the 
work  of  management  and  construction.  With  associates, 
secured  the  control  of  the  Toledo,  St.  Louis  &  Western  Railroad 
(Clover  Leaf  Road),  which  he  rehabilitated  and  made  succt 
was  selected  in  1905  by  President  Roosevelt  as  chairman  of 
Isthmian  Canal  Commission,  continuing  at  its  head  until  Feb- 
ruary, 1907,  when  he  was  elected  president  of  the  Interborough- 
Mctropolitan  System  of  New  York,  entering  upon  his  duties 
March  4,  1907.  Also  president  Chicago  and  Alton,  Toledo,  St. 
Louis  &  Western,  Minneapolis  and  St.  Louis,  and  Iowa  Central 
Railroads. 


THE  ERA  OF  INDUSTRIAL  EXPANSION  165 

acy  of  the  seas.  Neither  party  could  foresee  the  time, 
not  very  distant  even  then,  when  the  English  interests  which 
had  sold  out  for  cash  to  the  Wall  Street  promoters  would 
buy  back  control  of  the  whole  unwieldy  combination  for 
one  third  or  one  fourth  of  the  price  paid  originally  by  the 
Americans.  Yet  even  in  the  face  of  the  popular  clamor  in 
England  during  1901,  the  chairman,  at  the  ensuing  annual 
meeting  of  the  Leyland  Company,  flatly  told  the  shareholders 
that  the  offer  made  was  so  extravagant  that  no  manage- 
ment had  a  right  to  refuse  it.  :<  The  vendors, "  wrote  a  high 
authority  in  the  British  shipping  trade,  "made  an  excep- 
tionally good  bargain,  which  it  is  probable  the  purchasers 
will  soon  find  out." 

Both  at  home  and  abroad,  cool-headed  criticism  of  this 
nature,  on  the  American  amalgamations,  was  occasionally 
heard;  in  fact,  a  process  of  this  sort  was  merely  riding  for 
a  fall — if  for  no  other  reason,  than  that,  in  the  prodigious 
inflation  of  values  which  prevailed,  the  resources  of  capital 
and  credit  must  eventually  be  exhausted.  It  usually 
happens,  in  such  episodes,  that  the  reckoning  comes  from 
an  unexpected  cause;  also  that  it  comes  at  the  moment  when 
the  public  and  the  speculators  have  reached  the  conclusion 
that  it  can  never  come.  Both  turned  an  absolutely  deaf 
ear  in  1901  to  financial  warnings,  and  to  the  aspirations  of 
the  financiers  themselves  there  seemed  to  be  no  limit.  It 
was  the  very  next  move  of  the  Wall  Street  promoters,  how- 
ever, which  brought  about  the  crash. 

The  operation  has  been  already  noticed  whereby  the 
Chicago,  Burlington  &  Quincy  Railway  was  bought  up  by 
the  Northern  Pacific  and  the  Great  Northern.  Now  the 
Burlington  was  more  useful  as  a  feeder  and  more  dangerous 
as  a  competitor  to  the  Union  Pacific  Railway  than  to  either 
of  these  two  buyers.  The  Union  Pacific  asked  to  participate 
in  the  Burlington  purchase,  but  the  request  was  refused. 


1 66 


PROGRESS  OF  THE   EMPIRE   STATE 


What  the  Union  Pacific  management  then  did  was  to  start 
in  to  buy  control  of  the  Northern  Pacific  itself  on  the  open 
market.  The  Northern  Pacific  management  discovered 
what  was  under  way,  and  proceeded  to  strengthen  its  own 
holdings  of  the  stock.  In  this  fight  for  ownership  of  a 
#155,000,000  corporation,  Mr.  J.  P.  Morgan  and  Mr.  E.  H. 
Harriman  were  brought  first  into  financial  collision.  Mr. 
Morgan,  then  at  the  pinnacle  of  his  prestige,  with  the 
billion-dollar  steel  amalgamation  just  achieved,  and  wield- 
ing a  personal  authority  and  power  which  made  his  will  the 
law  with  a  good  part  of  Wall  Street's  capitalists  and  institu- 
tions, represented  the  controlling  interest  in  Northern 
Pacific.  His  adherents,  among  whom  Mr.  James  J.  Hill 
of  the  Great  Northern  was  the  most  important,  did  not  own 
a  clear  majority  of  the  stock,  but  their  financial  resources, 
and  the  credit  which  they  were  able  to  command  in  this 
country  and  in  Europe,  were  now  utilized  to  make  control 
secure.  Mr.  Harriman,  a  younger  man,  with  a  genius  for 
both  railway  management  and  for  stock  speculation,  was 
in  full  control  of  the  Union  Pacific  Railway  Company,  and 
was  affiliated  with  a  body  of  immensely  wealthy  capitalists 
known  as  the  "Standard  Oil  group."  His  task,  in  acquir- 
ing upwards  of  #77,000,000  Northern  Pacific  stock,  was  in 
fact  considerably  greater  than  Morgan's,  because  he  had  no 
such  substantial  holdings  to  start  with  as  the  Morgan  inter- 
est held.  He  surmounted  this  handicap  by  daring  use  of 
the  Union  Pacific's  credit.  The  shareholders  had  voted 
the  Union  Pacific  management  borrowing  powers  which 
amounted  almost  to  carte  blanche  in  the  money  market, 
and  in  those  days  of  easy  credit  and  accommodating  bank- 
ing syndicates,  the  powers  had  been  so  used  as  to  accumulate 
a  great  reserve  of  cash.  A  subsidiary  company,  the  Oregon 
Short  Line,  was  equipped  by  the  Union  Pacific,  in  return 
for   certificates   of   indebtedness,    with    funds    to   buy    up 


THE  ERA  OF  INDUSTRIAL  EXPANSION  167 

#78,000,000  Northern  Pacific  stock,  and  with  these  resources 
its  brokers  entered  the  excited  Wall  Street  market. 

The  resultant  situation  was  too  much  for  Europe,  whose 
banking  houses  had  been  lending  freely  to  the  great  Ameri- 
can promoters,  but  which  now  began  to  take  in  sail.  Paris 
bankers  at  once  stopped  further  advances;  the  Bank  of 
England  called  the  London  joint-stock  banks  together  to 
warn  them  against  New  York.  The  contest  for  Northern 
Pacific,  however,  did  not  slacken.  As  the  stock  rose  from 
1 10  to  more  than  200,  international  bankers  sold  heavily — 
borrowing  stock  for  delivery,  to  be  replaced  by  the  real 
foreign  shares  on  the  way  from  London — and  speculators 
for  the  decline  sold  still  more  largely,  in  expectation  of  a 
break  on  which  they  could  buy  in  at  lower  prices  to  close 
out  their  contracts.  But  they  misunderstood  the  situation. 
The  rival  bidders,  as  it  happened,  were  bent,  not  on  taking 
profits  in  the  rise,  but  on  obtaining  and  locking  up  the 
actual  shares.  On  the  9th  of  May,  it  was  suddenly  dis- 
covered that  deliveries  of  more  Northern  Pacific  stock  had 
been  thus  contracted  for  than  could  be  bought  or  borrowed. 
The  #155,000,000  stock  was  cornered.  Its  price  went  up 
in  an  hour  from  160  to  1000;  for,  naturally,  enforcement  of 
the  contracts  of  sale  meant  ruin  for  the  seller,  and  the 
scramble  of  cornered  brokers  to  protect  themselves  was  in- 
stantaneous. While  this  was  happening  to  Northern  Pacific 
stock,  all  other  stocks  broke  violently,  declines  of  50  per 
cent,  or  more  occurring  in  many  of  the  soundest  shares. 
It  was  admitted,  afterward,  that  on  the  books  of  the  lending 
banks,  and  on  the  basis  of  the  day's  low  prices  for  collateral 
pledged  against  Stock  Exchange  loans,  a  good  part  of  Wall 
Street  was  for  a  couple  of  hours  technically  insolvent. 

The  crisis  itself  passed  over  when  the  two  rival  bidders, 
their  hands  forced  by  the  disastrous  results  which  their 
quarrel  had  invoked,  came  together  and  agreed  on  conditions 


1 68  PROGRESS  OF  THE   EMPIRE   STATE 

which  would  relieve  the  victims  of  the  corner;  but  the  spell 
was  broken.  Much  of  the  public's  infatuation  had  been 
based  on  the  enormous  and  accumulating  "foreign  credit 
balance"  of  the  country  which  had  been  estimated,  a  year 
before,  at  not  less  than  #200,000,000.  By  the  middle  of 
1901  it  was  figured  out  by  competent  experts  that  not  only 
had  this  great  credit  been  entirely  wiped  out  by  the  drafts 
of  our  banking  houses,  but  that  a  floating  debt  to  Europe, 
footing  up  nearly  as  much,  had  been  created.  Our  bankers 
had,  in  fact,  borrowed  heavily  in  London,  Paris,  Berlin, 
Amsterdam,  and  even  in  the  poorer  European  markets, 
like  Vienna.  These  loans,  as  they  matured,  were  called 
in  by  the  lenders,  and  in  the  harvest  months  of  1901,  when 
gold  ought  to  have  been  flowing  towards  this  country,  the 
United  States  shipped  #25,000,000  gold  to  Europe.  One  of 
the  largest  of  the  new  trade  combinations,  the  #155,000,000 
Amalgamated  Copper  Company,  had  been  holding  the 
market  for  that  metal  at  an  artificial  price;  in  the  autumn 
of  1901,  it  lost  its  market,  copper  fell  from  16  cents  a  pound 
to  11,  and  the  "holding  company"  had  to  cut  its  annual 
dividend  from  8  per  cent,  to  2.  At  the  height  of  the  April 
speculation,  Wall  Street  had  dismissed  warnings  of  possible 
agricultural  disaster  with  the  reply  that  the  country  no 
longer  depended  on  agriculture.  Nature's  response  was  a 
summer  of  scorching  drought  in  the  corn-belt,  similar  to 
that  of  1894,  as  a  result  of  which  the  corn  crop  of  1901  was 
cut  down  28  per  cent,  from  the  year  before,  its  yield  being, 
except  for  1894,  very  much  the  smallest  in  eleven  years. 
Only  the  good  fortune  of  a  "bumper"  wheat  crop,  in  a  year 
of  partial  European  shortage,  saved  our  export  trade  of  1901. 
The  reaction  from  the  excesses  of  1901  continued  during 
the  two  ensuing  years;  for  although  speculation  again  grew 
rampant  in  1902,  with  resumption  of  promoters'  activities 
and  stock-jobbing  exploits,  the  signs  of  public  abstention 


THE  ERA  OF  INDUSTRIAL  EXPANSION  169 

and  over-strained  credit  were  visible  throughout  the  year. 
With  the  autumn,  a  severe  money  squeeze  was  the  sequel 
to  the  activities  of  the  speculators,  and  the  year  1903  began 
with  evidence  that  the  "underwriting  syndicates,"  which 
had  guaranteed  the  numerous  Wall  Street  promotions  of  the 
two  preceding  years,  were  caught  in  a  trap.  Banks  which 
had  loaned  them  money  began  to  force  a  settlement.  The 
stocks  which  they  held  had  for  some  time  been  popularly 
known  as  "undigested  securities,"  showing  that  the  public 
understood  the  situation.  A  little  later  on  it  was  James 
J.  Hill,  the  author  of  the  "Burlington  deal,"  who  suggested 
the  term  "indigestible  securities."  The  syndicates  began 
by  selling  their  reserve  investments  of  older  high-grade 
stocks  and  bonds,  and  the  market  broke  under  their  sales. 
Some  of  these  syndicates,  fairly  forced  to  the  wall,  next 
threw  on  the  market  the  underwritten  securities,  to  get 
what  they  could  for  them. 

They  got  very  little,  for  along  with  this  heavy  selling 
came  news  most  disquieting  to  investors.  The  hastily 
capitalized  industrial  corporations  themselves  began  to  raise 
signals  of  distress.  Some  of  them,  like  the  New  England 
Cotton  Yarn,  which  had  been  paying  7  per  cent,  dividends, 
called  a  cash  assessment  from  their  shareholders.  The  great 
steel  corporation  stopped  dividends  on  its  common  stock, 
which  had  been  paid  since  the  company  was  organized, 
and  with  the  subsequent  fall  in  prices  of  its  shares,  the 
market  valuation  of  the  stock,  which  had  been  #785,000,000 
in  1901,  fell  in  1903  to  #350,000,000. 

Other  smaller  combinations  followed  its  example.  The 
Consolidated  Lake  Superior,  a  #100,000,000  iron  trade 
combination,  which  had  paid  7  per  cent,  dividends  on  its 
stock,  up  to  the  preceding  December,  went  suddenly  into 
bankruptcy.  The  United  States  Shipbuilding  Company, 
which  sold  its  bonds  on  the  assurance  that  foreign  investors 


170  PROGRESS  OF  THE   EMPIRE   STATE 

were  buying  both  them  and  its  #50,000,000  stock,  was  placed 
in  the  hands  of  receivers,  with  an  exposure  of  humbug  which 
was  little  less  than  farcical.  Its  promoters  had  never  even 
approached  great  foreign  bankers,  but  had  been  dealing 
with  needy  adventurers  around  the  Bourse  who  had  not 
the  money  to  equip  a  mill.  In  the  unsettlement  of  public 
confidence,  there  was  even  a  run  on  financial  institutions, 
and  serious  bank  failures  in  two  or  three  smaller  cities. 

Yet,  whatever  may  have  been  the  really  fundamental 
cause  of  the  crash  of  1903,  the  fact  is  that,  as  in  the  sequel 
of  1884,  the  doubts  and  misgivings  of  this  minor  crisis  were 
dismissed  within  a  year  and  a  half.  By  1905,  not  only  the 
United  States,  but  Europe  also,  had  resumed  the  "industrial 
boom"  on  a  scale  of  substantial  magnitude.  To  at  least 
some  extent,  it  is  reasonable  to  suppose  that  resumption  of 
full  gold  production  in  South  Africa  had  an  influence.  Other 
circumstances  conspired  to  stimulate  this  movement  of 
recovery.  Two  years  of  exceptional  agricultural  pros- 
perity occurred;  of  wheat  in  particular,  the  world  produced 
in  1905  a  crop  larger  by  nearly  100,000,000  bushels  than 
ever  before  harvested,  and  in  1906  the  yield  was  100,000,000 
larger  still.  Prior  to  1902,  the  world's  largest  wheat  yield 
had  been  2,900,000,000  bushels;  the  crop  of  1906  was 
3,400,000,000;  yet  such  was  the  magnitude  of  consumption 
that  English  experts  estimated  the  second  of  these  figures 
to  have  been  only  1,440,000  bushels  beyond  the  world's 
actual  requirements  for  the  season.  In  the  United  States, 
despite  the  signs  of  diminishing  productive  capacity  in  1904, 
the  wheat  crops  of  1905  and  1906  surpassed  all  precedent 
except  the  great  "wheat  year"  1901 ;  the  corn  crop  estab- 
lished a  new  maximum  yield  in  each  of  these  two  years; 
the  cotton  yield  of  1905  was  the  third  largest  in  our  agri- 
cultural history  and  that  of  1906  was  only  a  trifle  below  the 
largest. 


JOHN  STANTON 

Was  conspicuous  in  copper  industry;  born  in  Bristol,  England, 
February  25,  1830;  mining  engineer  and  expert.  Developed 
mines  in  Virginia,  Maryland,  North  Carolina,  Tennessee,  and 
irior  region.  Was  president  of  the  Wolverine,  Mohawk, 
and  Baltic,  and  treasurer  of  the  Atlantic  &  Central  Mining  Co., 
and  stockholder  in  practically  all  the  Lake  Superior  mining  and 
copper  companies.  Director  in  several  coal  companies,  and  one 
of  the  founders  of  the  New  York  Metal  Exchange  in  1876,  of 
which  he  was  president  two  years.  President  of  the  Engineers' 
Club;  member  of  the  American  Institute  of  Mining  Engineers, 
the  Lake  Superior  Mining  Institute,  and  the  North  of  England 
Institute  of  Mining  &  Mechanical  Engineers.  Died  February 
23,  1906. 


THE  ERA  OF  INDUSTRIAL  EXPANSION  171 

Notwithstanding  this  bounty  of  nature,  prices  and  cost 
of  living  rose  with  greater  rapidity  than  at  any  time  in  a 
generation  past.  Taking  the  London  Economist's  "index 
number"  as  a  measure,  we  shall  find  that  between  the  middle 
of  1897,  when  the  low  level  of  the  period  was  reached,  and  the 
end  of  1904,  the  average  of  commodity  prices  had  risen  from 
1885  to  2136.  Between  the  middle  of  1904  and  the  middle 
of  1907,  it  had  advanced  to  2601.  Comparing  the  index 
number  for  the  end  of  1904  with  that  for  the  middle  of 
1897,  we  shall  find  an  advance  of  13!  per  cent.  Compar- 
ing the  number  for  the  middle  of  1907  with  that  for  the  end 
of  1904,  we  shall  find  the  rise  for  that  second  period  was  no 
less  than  2lf£  per  cent.  Putting  the  matter  in  another  way, 
on  the  basis  of  units,  the  increase  in  the  index  number,  from 
1897  to  1904  inclusive,  was  251  points;  from  1904  to  1907 
inclusive,  it  was  465  points. 

In  1901,  cotton  was  considered  dear  at  10  cents  a  pound; 
a  short  crop  and  a  New  York  corner  raised  the  price  in 
March,  1904,  to  i6f,  from  which,  on  the  harvesting  of  a 
crop,  the  ensuing  season,  20  per  cent,  larger  than  the  pre- 
vious maximum  yield,  it  fell  to  8  cents  or  thereabouts.  The 
cotton  growers  thereupon  organized ;  conventions  were  held, 
an  association  formed  with  branches  throughout  the  cotton 
belt;  resolutions  were  adopted  fixing  the  minimum  price 
at  15  cents  a  pound,  and  arrangements  made  for  advancing 
money  to  the  planter,  whereby  he  might  hold  his  cotton  off 
the  market  until  his  price  was  reached.  The  "official  price" 
was  not  achieved ;  but  a  good  part  of  the  crop  of  1906,  which 
was  only  slightly  smaller  than  the  largest  yield  on  re- 
cord, was  sold  at  prices  ranging  from  12  to  13  cents.  Mean- 
time, hand  in  hand  with  the  rise  in  price  of  merchandise, 
land  and  rents  advanced.  The  rise  in  land  values,  which 
began  in  earnest  during  1904,  reached  the  next  year,  in  a  good 
part  of  this  country,  the  proportions  of  a  mania.]  Farm  lands 


172  PROGRESS  OF  THE   EMPIRE  STATE 

naturally  led  in  the  movement;  with  the  great  harvests  and 
the  high  prices,  their  actual  earning  power  was  enormously 
enhanced;  they  doubled,  trebled,  and  quadrupled  in  value. 
But  town  and  city  lots,  throughout  the  country,  followed 
suit.  Speculation  grew  violent  in  a  hundred  widely  separ- 
ated localities,  and  one  would  see,  fifty  or  sixty  miles  away 
from  populous  cities,  unimproved  meadowland  staked  out 
with  street  signs  of  avenues  and  boulevards,  and  in  some 
cases  dealt  in  through  paper  "options,"  the  speculators  not 
taking  the  trouble  even  to  pass  title.  Sums  wholly  with- 
out precedent  were  invested  in  the  erection  of  town  and  city 
dwellings.  In  New  York  City,  capital  expended  on  con- 
struction of  new  buildings  had  never,  even  in  the  excited 
years  of  1899  and  1901,  exceeded  $150,000,000;  it  was  only 
$139,000,000  in  1904.  But  in  1905,  it  rose  to  the  extraor- 
dinary figure  of  $230,000,000,  and  this  was  typical  of 
dozens  of  cities  throughout  the  United  States. 

A  quite  inevitable  outcome  of  this  extraordinary  rise 
in  cost  of  materials  and  labor  was  the  demand  for  increased 
amounts  of  capital  for  use  in  trade,  and  a  rise  in  the  price 
of  money.  Even  among  merchants,  it  was  common  com- 
plaint that  nearly  twice  as  much  money  had  to  be  used  to 
conduct  the  same  volume  of  business  as  had  been  necessary 
two  or  three  years  before.  Manufacturers  had  the  higher 
cost  of  labor  and  materials  to  absorb  increased  capital  on 
the  same  amount  of  output,  and  this  happened  at  a  time 
when  the  bank-deposit  fund,  the  surplus  capital  of  the 
community,  was  being  narrowed  by  the  increasing  cost  of 
living.  That  necessarily  meant  low  bank  reserves  and 
dear  money.  Yet  evidence  of  a  growing  strain  on  capital 
resources  was  no  more  conspicuous  than  evidence  of  the 
financial  community's  readiness  to  draw  still  more  largely 
on  the  credit  market.  This  readiness  was  tested  in  a  very 
conclusive  way.    On  the  night  of  February  8,  1904,  the  Jap- 


THE  ERA  OF  INDUSTRIAL  EXPANSION  173 

anese  fleet  attacked  the  Russian  squadron  at  Port  Arthur, 
and  one  of  the  three  most  costly  wars  since  the  Napoleonic 
era  began.  It  continued,  on  sea  and  land,  until  August 
29,  1905,  and  it  involved  an  expenditure,  by  the  two  bellig- 
erents, of  a  sum  not  far  below  two  thousand  million  dollars. 
Although  1904  had  been  the  year  of  heavy  Japanese 
loans  in  London,  requisitions  on  that  market's  capital, 
through  new  security  issues,  ran  in  1905  $220,000,000  above 
the  preceding  year,  reaching  a  height  never  exceeded  save 
in  the  twelvemonth  before  the  "Baring  panic  year." 
Exchange  of  checks  at  the  London  Bankers'  Clearing-house, 
in  1905,  rose  16  per  cent,  above  the  highest  previous  yearly 
total,  and  30  per  cent,  above  so  active  a  year  as  1899.  All 
this  reflected  immense  activity  at  the  central  money  market 
of  the  world.  In  the  United  States,  bank  clearings  in  1905 
rose  27  per  cent,  over  1904  and  greatly  exceeded  all  pre- 
vious records;  yet  those  of  1906  were  n  per  cent,  larger 
still.  On  the  European  continent,  Germany's  issue  of  new 
securities  in  1905  was  70  per  cent,  larger  than  in  1904;  the 
estimated  total,  $770,000,000,  comparing  with  $615,000,000 
in  1898,  itself  the  maximum  of  that  decade's  excited  "boom" 
and  the  previous  high  record  in  the  country's  history.  That 
it  was  not  alone  financial  activity,  moreover,  which  was 
pulling  at  the  market's  purse-strings,  may  be  shown  by  the 
fact  that  iron  production,  a  fair  measure  of  industrial  con- 
ditions, increased  in  England  from  8,500,000  tons  in  1904 
to  9,500,000  in  1905  and  10,000,000  in  1906 — a  30  per  cent, 
increase  over  1901;  in  Germany  from  10,000,000  tons  in 
1904  to  12,200,000  in  1906,  and  in  the  United  States  from 
16,400,000  tons  in  1904  to  25,300,000  in  1906,  the  figures  of 
the  last-named  year  being  in  all  three  instances  unprece- 
dented. "Everything  is  in  motion,"  wrote  a  trained 
observer  regarding  1906;  "railways,  steamers,  factories, 
harbors,  docks;  it  is  evident  that  so  gigantic  a  development 


174  PROGRESS  OF  THE   EMPIRE  STATE 

of  trade  and  industry  could  not  fail  to  have  a  marked 
influence  upon  the  position  of  the  international  money- 
market." 

That  influence  would  have  been  less  formidable,  even 
with  the  engulfing  of  capital  in  the  Eastern  war  loans,  had 
not  speculation,  with  its  enhancement  of  values  and  its 
peremptory  demand  on  bank  resources,  thrown  its  weight 
into  the  scale.  Let  it  again  be  observed  that,  unlike  our 
"boom"  of  1901,  the  industrial  expansion  of  1905  and  1906, 
and  the  speculation  which  accompanied  it,  were  limited 
only  by  the  bounds  of  the  civilized  world.  In  October, 
1905,  when  the  Imperial  Bank  of  Germany  put  up  its  dis- 
count rate  successively  to  5,  to  5^2,  and  to  6  per  cent. — the 
last-named  figure  being  the  highest  ever  reached,  except  in 
time  of  actual  financial  panic — the  authorities  of  the  bank 
declared  publicly  that  the  volume  of  uncovered  note  cir- 
culation, a  pure  emergency  device,  was  the  largest  in  the 
history  of  the  institution,  and  that  the  high  discount  rate 
was  expressly  designed  to  apply  a  curb  to  the  German 
speculative  mania.  In  Egypt,  land  and  stock  speculation 
reached,  between  1905  and  1907,  a  pitch  of  excitement  which, 
later  on,  a  responsible  financier  described  as  meaning  that 
the  "  people  were  apparently  mad ;  I  do  not  know  what  other 
word  to  use;  they  seemed  to  think  that  every  company  that 
came  out  was  worth  double  its  value  before  it  had  even 
started  business."  In  Japan,  the  declaration  of  peace  in 
August,  1905,  was  followed  by  what  was  described  in  a 
subsequent  government  review  as  a  "fever  of  enterprise," 
in  which  "prices  of  securities  rose  higher  and  higher,"  with 
"a  similar  rise  of  prices  in  general,"  and  of  which  high 
banking  authority  remarked  that,  by  1906,  "men  of  judg- 
ment had  already  begun  to  look  askance  at  this  state  of 
affairs." 

Of  the  American  speculation  in  commodities  and  land, 


THE  ERA  OF  INDUSTRIAL  EXPANSION  1 75 

mention  has  already  been  made;  but  the  spectacular 
interest  of  the  period  attached  to  the  Stock  Exchange. 
During  the  autumn  of  1905  this  speculation  reached  a 
singular  position.  It  was  not,  like  the  American  stock 
speculation  of  1901,  conducted  on  the  basis  of  public  partici- 
pation; the  real  outside  investor  now  had  employment  for 
his  own  capital  in  the  increasing  demands  of  his  private 
business.  But  to  his  absence  the  speculative  leaders,  who 
comprised  large  groups  of  immensely  wealthy  capitalists, 
bank  officers,  and  railway  directors,  were  seemingly  indif- 
ferent. Their  bank  affiliations  enabled  them  to  pursue  their 
course  unchecked;  their  use  of  credit  was  practically  unre- 
strained; there  seemed  no  bounds  to  the  audacity  of  their 
ventures. 

These  exploits  were  carried  out  in  the  face  of  rapidly 
falling  bank  reserves  and  rapidly  rising  money  rates.  Even 
at  the  height  of  the  speculative  craze  of  1901,  mercantile 
discounts  at  New  York  had  ranged  around  5  per  cent.;  in 
the  autumn  of  1905,  the  full  legal  rate  was  charged,  plus  a 
"broker's  commission,"  which  brought  the  actual  rate  as 
high  as  7  per  cent. — a  very  abnormal  figure,  showing  that 
general  trade  was  feeling  the  strain.  But  Stock  Exchange 
speculation  did  not  halt;  in  various  stocks  controlled  by 
powerful  groups  of  capitalists,  advances  of  10  to  20  per 
cent,  occurred,  with  enormous  trading.  When  the  New 
York  banks  reported  a  steadily  weakening  position,  recourse 
was  had  to  Europe.  Money  was  raised  in  London  on  the 
collateral  of  these  speculative  holdings,  and  great  blocks  of 
American  stock  were  shipped  from  New  York  to  the  English 
market.  On  November  11,  1905,  and  again  on  December 
9th,  reserves  of  the  New  York  Associated  Banks  fell  below 
the  25  per  cent,  ratio  to  deposits  stipulated  by  the  National 
Bank  Act.  Rates  for  demand  loans  on  Wall  Street  went 
to  25  per  cent,  in  November,  and  still  the  Stock  Exchange 


176  PROGRESS  OF  THE   EMPIRE   STATE 

speculation  for  the   rise   continued.     On   December  28th, 
the  rate  reached  125. 

Such  events  as  have  been  narrated  were  of  a  character 
to  influence  profoundly  social  and  political  conditions,  and 
no  review  of  the  period  would  be  at  all  adequate  which  did 
not  make  careful  account  of  developments  in  such  directions. 
The  advance  in  commodity  prices;  the  growth  of  industrial 
combinations,  on  a  scale  of  magnitude  beyond  the  imagi- 
nation of  the  previous  decade;  the  sensational  speculation 
in  securities  and  commodities;  the  overshadowing  power 
acquired,  through  their  bank  and  company  affiliations,  by 
groups  of  immensely  wealthy  capitalists — these  were  the 
typical  phenomena  of  the  day.  They  were  dominant 
influences  on  financial  markets;  but  they  also  touched 
closely  the  everyday  life  and  habits  of  the  ordinary  citizen. 
Socially,  they  had  two  distinct  and  opposite  effects.  The 
first  was  extravagance  of  living — more  spectacular  in  the 
case  of  men,  like  the  independent  steel-producers  of  1901, 
whom  the  "deals"  of  the  great  trade  combinations  had 
suddenly  made  millionaires  many  times  over — but  noticeable 
also  in  the  community  at  large.  Belief  in  impregnable 
prosperity  was  general,  and  with  that  belief  came  not  only 
lavish  private  expenditure,  but  appetite  for  speculation. 
One  important  question  was  no  longer  merely  that  of  the 
size  of  combinations,  but  of  the  purposes  of  the  controlling 
interests.  Mr.  Harriman,  who  had  won  repute  not  only  as 
a  skillful  railway  manager  but  as  a  daring  speculator,  was 
authorized  by  the  Union  Pacific  board,  of  which  he  was 
chairman,  to  "borrow  such  sums  of  money  as  may  be 
required  for  the  uses  of  this  company,  and  to  execute  in  the 
name  and  on  behalf  of  this  company  a  note  or  notes  for  the 
amount  so  borrowed."  Had  Harriman  achieved  his  purpose 
of  capturing  the  Northern  Pacific  in  1901,  his  success,  com- 
bined with  his  previous  acquisitions,  the  Interstate  Com- 


1IMIIIIMIIII   IIIIIIIICIIIIIII 


I 


HOME  OF  THOMAS  F.  RYAN 

This  building,  of  white  stone,  on  upper  Fifth  Avenue,  was 
purchased  by  Mr.  Ryan  about  1910,  and  has  been  used  since  as 
his  city  residence.  Mr.  Ryan  occupied  for  many  years  the 
substantial  brick  building  at  No.  60  Fifth  Avenue.  He  also  has 
a  home  on  the  site  of  his  birthplace  in  Virginia,  named  Oak  Ridge, 
where  he  maintains  his  legal  residence,  and  a  country  house  at 
Suffern,  N.  Y. 


> 


THE  ERA  OF  INDUSTRIAL  EXPANSION  177 

merce  Commission  declared,  "would  have  subjected  to  a 
common  will  and  policy  nearly  one-half  of  the  territory  of 
the  United  States — a  comparatively  undeveloped,  rapidly 
growing  and  extremely  rich  territory,  into  which  must 
necessarily  extend  the  population  and  business  of  the 
Eastern  States."  Even  as  regarded  the  rest  of  the  United 
States,  Harriman  defiantly  testified,  in  a  public  hearing, 
that  if  the  law  would  let  him  alone,  he  would  "spread  not 
only  over  the  Pacific  coast,  but  spread  over  the  Atlantic." 
"I  would,"  he  declared  of  his  policy  of  buying  up  one  group 
of  railroads  on  the  credit  of  another,  "goon  as  long  as  I  live." 
When  the  Northern  Securities  holding  company,  formed  to 
own  a  majority  interest  in  the  Northern  Pacific  and  Great 
Northern  railways,  came  before  the  court,  and  its  counsel 
was  setting  forth  the  good  influence  of  the  merger,  he  was 
asked  from  the  United  States  Supreme  Bench  if  the  same 
machinery  might  not  be  employed  to  buy  up  all  the  railways 
of  the  United  States,  and  place  control  of  the  whole  of  them 
in  the  hands  of  three  or  four  individuals.  He  answered 
that  such  use  of  it  would  be  highly  improbable,  but  that  it 
might  be  so  employed. 

It  was  not  alone,  however,  the  possibilities  arising  from 
such  power  on  which  public  interest  was  converged  by  the 
movement  of  events,  but  the  manner  of  acquiring  the  power. 
On  this  question,  what  was  deemed  at  the  time  an  accident 
poured  a  sudden  flood  of  light.  In  February,  1905,  a 
quarrel  broke  out  between  the  president  and  vice-president 
of  the  Equitable  Life,  a  joint-stock  institution  with  #413,- 
000,000  total  resources  but  a  share  capital  of  only  #100,000, 
of  which  #5 1 ,000  was  owned  by  one  James  H.  Hyde,  a  young 
man  of  twenty-seven,  son  of  the  founder  of  the  company. 
This  stock  carried  only  7  per  cent,  dividends ;  but  the  major- 
ity holding  gave  to  its  owner  unusual  power  for  overruling 
policies  of  the  president  and  trustees.     The  president  of  the 


178  PROGRESS  OF  THE   EMPIRE   STATE 

Equitable  sent  to  his  fellow-directors,  over  his  signature 
and  that  of  other  active  officers,  a  flat  declaration  that  the 
reelection  of  Mr.  Hyde  as  vice-president  "would  be  most 
prejudicial  to  the  welfare  and  progress  of  the  society  and  the 
conservation  of  the  trust  funds."  At  the  ensuing  annual 
meeting  of  the  Equitable  trustees,  this  protest  was  again 
submitted,  and  a  petition  to  turn  the  society  from  a  joint- 
stock  into  a  mutual  company  was  added.  The  course  of  the 
personal  dispute  need  not  concern  us  further;  in  the  event, 
Mr.  Hyde  and  the  President,  Mr.  Alexander,  both  retired 
from  the  company.  The  real  significance  of  the  episode 
was  that  it  compelled  investigation  and  publicity  regard- 
ing the  use  of  the  Equitable's  funds. 

First,  the  trustees  appointed  a  committee  of  their  own; 
this  committee,  three  months  later,  submitted  a  report 
which  threw  the  directors'  meeting  into  disorder,  and  led  to 
a  searching  inquiry  by  the  New  York  Legislature.  The 
Frick  committee  found  that  officers  of  the  Equitable  had 
used  the  company's  funds  as  subscriptions  to  "under- 
writings"  organized  by  themselves,  thereby  violating  the 
insurance  law;  that  one  of  them  had  without  authority 
carried  in  his  own  name  large  blocks  of  securities  owned  by 
the  company ;  that  the  Equitable,  which  was  debarred  by  law 
from  speculative  undertakings  in  Wall  Street,  had  bought 
control  of  three  trust  companies  with  broader  powers,  and 
had  kept  on  deposit  with  those  companies  the  greater  part 
of  its  own  cash  surplus;  that  in  1903,  with  #36,000,000  thus 
deposited,  it  had  been  unable  to  use  for  its  own  legitimate 
investments  any  part  of  the  money  thus  deposited,  undoubt- 
edly because  the  deposit  had  been  tied  up,  through  these 
other  banking  institutions,  in  illegitimate  financial  ventures; 
and  that  its  president,  with  that  huge  sum  in  bank  and  with 
standard  investment  securities  at  a  most  inviting  price, 
had  written  to  a  fellow-officer  that  "we  would  be  buying  a 


THE  ERA  OF  INDUSTRIAL  EXPANSION  179 

good  many  of  such  things  were  it  not  that  we  are  so  strapped 
for  money  by  engagements  already  made." 

When  a  committee  of  trustees  had  exposed  such  per- 
formances with  the  trust  funds  of  the  people,  it  was  plain 
that  the  State  would  have  to  take  a  hand.  The  New  York 
Legislature  promptly  named  a  committee  of  investigation. 
LInder  the  guidance  of  its  counsel,  Charles  E.  Hughes,  it 
began,  on  September  6,  1905,  a  searching  examination  of  all 
of  the  great  companies.  The  committee  found  relatively 
little  of  the  sale  of  securities  to  companies  by  their  own 
trustees,  as  exposed  by  the  Frick  committee,  but  very  much 
use  of  the  companies'  funds  to  participate  in  syndicates  in 
which  trustees  were  personally  interested.  Employment 
of  life  insurance  funds,  through  subsidiary  companies,  for 
investment  in  undertakings  forbidden  to  the  life  concerns 
themselves — including  the  United  States  Steel  and  "Ship- 
ping Trust"  promotions — was  found  to  have  prevailed  on 
an  extensive  scale,  and  occasionally  with  misleading  entries 
on  the  books;  legislators,  political  committees,  and  even 
newspapers  had  been  subsidized  in  enormous  sums.  Along 
with  this,  exorbitant  salaries  and  nepotism  had  prevailed, 
but  dividends  to  policyholders  had  not  only  decreased 
actually,  but  had  fallen  far  below  official  and  published 
estimates.  The  climax  of  this  extraordinary  testimony 
was  capped  by  the  president  of  one  of  the  largest  companies, 
who,  when  confronted  with  the  above  conditions,  declared 
on  the  stand  that  the  promoters  of  his  company  had  acted 
"from  a  pure  spirit  of  philanthropy  and  benevolence," 
establishing  "a  missionary  enterprise,  so  to  speak";  but 
that  it  "was  n't  the  object  to  declare  a  dividend  to  a  man," 
in  order  that  a  policyholder,  having  paid  his  annual  pre- 
mium, should  "then  at  the  end  of  the  year  get  seven  dollars 
and  go  home  and  spend  it  for  cigars." 

This    investigation,    publicly    conducted    during    four 


180  PROGRESS  OF  THE   EMPIRE   STATE 

successive  months,  and  reported  in  every  newspaper,  had 
an  influence  on  public  sentiment  which  was  difficult  to 
measure.  In  the  insurance  field  itself  a  radical  reform  law 
was  enacted,  by  which  the  life  companies  were  prohibited 
from  owning  other  institutions,  and  were  required  after  an  in- 
terval of  years  to  get  rid  of  their  holdings  of  trust  company, 
safe  deposit,  railway,  and  other  stocks.  At  the  height  of  the 
excitement,  in  1905,  Mr.  Hyde's  controlling  interest  of  51 
percent,  of  the  Equitable  stock,  with  a  par  value  of  #100,000, 
was  purchased  by  Mr.  Thomas  F.  Ryan  for  #2,500,000. 
Although  Mr.  Ryan  at  once  placed  the  stock  in  the  hands  of 
three  voting  trustees, — Grover  Cleveland,  ex-Judge  Morgan 
J.  O'Brien,  and  Lewis  Cass  Ledyard, — the  effect  of  this 
purchase  upon  public  opinion  was  not  especially  favorable, 
and  the  stock  was  ultimately  taken  over,  several  years 
later,  by  Mr.  J.  P.  Morgan.  Under  the  trusteeship,  an 
effort  was  made  to  inject  into  the  directorate  a  larger  ele- 
ment of  the  business  community  outside  of  "Wall  Street"; 
and  Paul  Morton,  who  had  had  a  somewhat  spectacular 
career  as  a  pet  of  President  Roosevelt  and  as  his  Secretary  of 
the  Navy,  was  made  president.  Morton  had  the  shrewd- 
ness to  engage  as  comptroller  of  the  company  and  prac- 
tically as  his  confidential  adviser  Judge  William  A.  Day, 
who  had  proved  his  industry  and  sobriety  of  judgment  in 
Washington  as  a  special  attorney  of  the  Department  of 
Justice.  Under  the  counsel  of  Judge  Day,  who  succeeded 
to  the  presidency  of  the  company  on  the  death  of  Morton 
in  January,  191 1,  the  Equitable  was  guided  into  more 
tranquil  waters. 

What  the  outcome  of  these  various  episodes  would  have 
been  upon  our  political  history,  had  the  conditions  which 
people  then  described  as  "the  existing  order  of  things" 
continued  to  prevail  at  Washington,  is  a  question  full  of 
interest.     We  possess  no  means  of  judging  confidently  how 


THE  ERA  OF  INDUSTRIAL  EXPANSION  181 

far  President  McKinley's  policies,  after  his  second  inaugu- 
ration in  1901,  might  have  been  shaped  or  altered  by  the 
new  industrial  problems  which  came  suddenly  into  view 
that  year.  All  we  can  say  is,  that  his  traditions  and  tem- 
perament were  not  such  as  to  have  invoked  a  collision  be- 
tween the  Executive  and  the  corporations.  The  question 
was  never  tested;  it  was  only  five  months  after  his  second 
term  began  that  he  was  shot  by  an  anarchist  at  Buffalo, 
where  he  died  on  September  14,  1901. 

Mr.  Roosevelt,  who  then  succeeded  him,  had  been  nomi- 
nated for  Vice-President  against  his  own  wish  and  there- 
fore without  pledges  or  commitments.  In  his  speech  on 
taking  the  oath  of  office,  however,  Mr.  Roosevelt  declared 
his  purpose  "to  continue  absolutely  unbroken  the  policy 
of  President  McKinley  for  the  peace,  prosperity,  and  honor 
of  our  beloved  country,"  and  he  at  once  requested  all  of 
McKinley's  cabinet  ministers  to  retain  office  during  the 
full  term  for  which  they  had  been  selected.  In  his  first 
message  to  Congress,  two  months  later,  he  declared  the 
"startling  increase  ...  in  the  number  of  very  large 
individual,  and  especially  of  very  large  corporate,  fortunes" 
to  be  due  "to  natural  causes  in  the  business  world" — a 
process  which  "has  aroused  much  antagonism,  a  great  part 
of  which  is  wholly  without  warrant. "  He  advised  "caution 
in  dealing  with  corporations,"  because  "to  strike  with 
ignorant  violence  at  the  interests  of  one  set  of  men  almost 
inevitably  endangers  the  interests  of  all,"  and  because  "the 
mechanism  of  modern  business  is  so  delicate  that  extreme 
care  must  be  taken  not  to  interfere  with  it  in  a  spirit  of 
rashness  or  ignorance." 

All  this  was  reassuring  to  those  capitalists  whose  plans 
had  apparently  been  disconcerted  by  McKinley's  death. 
They  paid  less  attention,  therefore,  to  the  new  President's 
further  declarations  that  "there  are  real  and  grave  evils,  one 


182  PROGRESS  OF  THE   EMPIRE   STATE 

of  the  chief  being  overcapitalization";  that  "combination 
and  concentration  should  be,  not  prohibited,  but  supervised 
and  within  reasonable  limits  controlled,"  and  that  "cor- 
porations engaged  in  interstate  commerce  should  be  regu- 
lated if  they  are  found  to  exercise  a  license  working  to  the 
public  injury."  It  was  out  of  these  three  declarations, 
however,  that  what  are  now  known  as  the  policies  of  the 
Roosevelt  Adminstration  grew. 

These  policies  soon  placed  the  Government  in  direct  and 
formidable  antagonism  with  the  ambitious  designs  of 
capitalists  which  we  have  already  had  occasion  to  review. 
The  case,  in  my  opinion,  was  such  that  any  and  all  available 
measures  for  protection  of  the  public  welfare  would  have 
been  invoked  by  any  government  resolved  on  challenging 
the  pretensions  of  the  great  promoters  of  the  day.  The 
instrument  selected  as  the  most  serviceable  on  the  statutes 
was  the  so-called  "Sherman  Anti-Trust  Law"  of  1890. 

In  February,  1902,  the  Attorney-General,  Mr.  P.  C. 
Knox,  entered  suit  for  the  Government  against  the  Northern 
Securities  Company.  This  concern  was  an  outgrowth  of 
the  famous  "Northern  Pacific  corner"  of  May  9,  1901,  when 
the  disastrous  contest  between  the  Harriman  and  Morgan 
interests,  for  ownership  of  the  Northern  Pacific  Railway, 
was  compromised  by  deposit  of  their  stock  and  that  of  the 
parallel  Great  Northern  Railway  Company  in  the  hands 
of  a  holding  corporation.  The  corporation  had  a  stock 
of  #400,000,000,  which  it  exchanged  for  shares  in  the  two 
railways;  its  directors  were  selected  from  the  rival  boards. 

Mr.  Knox  attacked  the  merger  as  "a  virtual  consoli- 
dation of  two  competing  transcontinental  lines,"  whereby 
not  only  would  "monopoly  of  the  interstate  and  foreign 
commerce,  formerly  carried  on  by  them  as  competitors,  be 
created,"  but  whereby,  through  use  of  the  same  machinery, 
"the  entire  railway  systems  of  the  country  may  be  absorbed, 


WILLIAM  A.  DAY 

President  Equitable  Life  Assurance  Society  of  the  United 
States.  Formerly  engaged  in  practice  as  lawyer;  was  appointed 
auditor  United  States  Treasury  by  President  Cleveland,  of  whom 
5  a  cordial  admirer;  special  assistant  to  Attorney-General  of 
United  States  in  cases  under  Interstate  Commerce  act  and  the 
Sherman  anti-trust  law;  Assistant  Attorney-General  of  United 
States  in  charge  of  prosecution  of  trust  cases,  1903-1905.  Was 
made  Comptroller  of  Equitable  Life  Assurance  Society  at  time 
of  reorganization  in  1905,  vice-president  in  1906,  and  president 
in  1911. 


THE  ERA  OF  INDUSTRIAL  EXPANSION  183 

merged,  and  consolidated."  A  year  after  its  introduction, 
on  April  9,  1903,  the  Circuit  Court  before  which  the  suit 
was  brought  decided  for  the  Government,  the  essential 
part  of  its  decision  being  the  dictum  that  the  merger 
"destroyed  every  motive  for  competition  between  the  two 
roads  engaged  in  interstate  traffic,  which  were  natural 
competitors  for  business. "  Appealing  thence  to  the  Federal 
Supreme  Court,  the  company's  counsel  fought  on  the  theory 
that  the  merger  was  no  restraint  of  trade  because  the  North- 
ern Securities  had  committed  no  overt  act  in  such  direction, 
and  because  the  combination  had  primarily  been  formed  to 
protect  and  develop  trade.  The  court,  in  its  decision  of 
March,  14,  1904,  found  that,  "necessarily,  the  constituent 
companies  ceased,  under  such  a  combination,  to  be  in  active 
competition  for  trade  and  commerce,"  and  that,  independ- 
ently of  overt  acts,  "the  mere  existence  of  such  a  combina- 
tion, and  the  power  acquired  by  the  holding  company,  .  .  . 
constitute  a  menace  to,  and  a  restraint  upon,  that  freedom 
of  commerce  which  Congress  intended  to  recognize  and 
protect." 

In  a  bench  of  nine,  four  justices  ruled  on  this  ground 
against  the  appeal  and  four  in  favor  of  it.  The  ninth 
member,  Justice  Brewer,  dissented  from  the  larger  applica- 
tion of  the  above-cited  principles,  on  the  ground  that  "the 
broad  and  sweeping  language  of  the  opinion  of  the  court 
might  tend  to  unsettle  legitimate  business  enterprises,  stifle 
or  retard  wholesome  business  activities, "  and  he  rejected  the 
application  of  the  Anti-Trust  Law  to  "minor  contracts  in 
partial  restraint  of  trade,"  already  recognized  by  common 
law.  But  he  held  the  Northern  Securities  device  to  be  one 
which  "might  be  extended  until  a  single  corporation  whose 
stock  was  owned  by  three  or  four  parties  would  be  in  practical 
control  ...  of  the  whole  transportation  system  of  the 
country,"  and  on  that  ground  concurred  in  dismissing  the 


184  PROGRESS  OF  THE   EMPIRE   STATE 

appeal.  The  order  of  the  lower  court,  that  the  Northern 
Securities  Company  be  dissolved,  was  therefore  reaffirmed. 
In  due  course,  though  not  until  after  another  legal  fight 
over  methods  of  redistributing  its  holdings  to  owners  of 
Northern  Securities  shares,  the  company  surrendered  its 
Northern  Pacific  and  Great  Northern  stock,  and  practically 
went  out  of  existence. 

The  Northern  Securities  victory  by  no  means  ended  the 
activities  of  the  government  prosecutors  against  corpora- 
tions, though  no  subsequent  achievement  was  of  equal 
importance.  To  a  large  extent,  the  later  moves  of  the 
Roosevelt  Administration  had  to  do  with  secret  discrimina- 
tions in  railway  rates.  In  some  of  these  suits  the  gravity 
of  the  abuse  was  not  so  clear,  and  in  others  the  outcome 
much  less  gratifying,  than  in  the  Northern  Securities  case. 
The  Standard  Oil  prosecution,  announced  by  the  President 
in  a  special  message  of  May  4,  1906,  ended  in  such  a  way  as 
largely  to  defeat  the  Government's  own  purposes.  The 
exploits  of  the  Standard  Oil  Company,  in  the  matter  of 
secret  concessions  from  the  railways,  had  been  exposed 
sensationally  in  the  popular  magazines,  and  the  Govern- 
ment won  a  jury  verdict,  in  August,  1907,  wholly  against  the 
company.  The  Elkins  Law,  on  which  the  suit  was  based, 
provided  that  "every  person  or  corporation  who  shall 
offer,  grant,  give  or  solicit,  accept  or  receive"  from  a  rail- 
way any  "rebates,  concession,  or  discrimination,"  should 
on  conviction  be  punished  for  each  offense  by  a  fine  of  not 
less  than  $1000  or  more  than  #20,000. 

Judge  Landis,  sitting  in  the  Federal  District  Court  of 
Indiana,  had  to  pass  on  the  question  how  many  separate 
offenses  were  to  be  subject  to  such  fine.  The  railway 
rebates  had  been  granted  during  the  period  from  September, 
1903,  to  March,  1905,  inclusive;  counsel  for  the  company 
asked,  first,  that  the  whole  series  be  adjudged  one  infraction 


THE  ERA  OF  INDUSTRIAL  EXPANSION  185 

of  the  law,  or,  second,  that  the  violations  be  fixed  at  three 
in  number,  because  the  rate  was  determined  once  a  year, 
or,  third,  that  the  number  be  declared  as  thirty-six,  because 
that  number  of  bills  were  rendered.  The  court  rejected 
all  three  suggestions;  declared  on  August  3,  1907,  that  each 
of  the  1462  loaded  cars  forwarded  at  the  discriminating 
rate  was  a  separate  offense;  imposed  for  each  the  maximum 
fine  of  $20,000,  and  thereby  arrived  at  the  somewhat  extraor- 
dinary penalty  of  $29,240,000.  This  fine,  imposed  as  it 
was,  not  on  the  $98,000,000  "Standard  Oil  Trust,"  but  on 
the  immediate  offender,  the  $1,000,000  subsidiary  Standard 
Oil  Company  of  Indiana,  went,  even  in  the  popular  judg- 
ment of  the  day,  beyond  the  bounds  of  reason;  it  was 
commonly  expected  that  the  higher  courts  would  set  it 
aside,  and,  as  a  matter  of  fact,  the  Illinois  Circuit  Court,  in 
July,  1908,  found  that  a  fine  thus  computed  "had  no  ba- 
sis in  any  intention  or  fixed  rule  discoverable  in  the  statute" 
and  was  many  times  confiscatory.  The  court  to  whom  the 
case  was  remanded  for  retrial  directed,  in  March,  1909,  a 
verdict  of  acquittal  for  lack  of  proper  evidence. 

In  this  matter,  despite  an  overwhelming  and  not  un- 
founded dislike  to  the  methods  of  the  Standard  Oil  Com- 
pany, public  sympathy  was  with  the  corporation.  On  the 
railway  rate  legislation,  passed  by  Congress  in  response 
to  the  President's  urgent  messages,  popular  approval  and 
disapproval  were  more  evenly  balanced  than  in  the  two 
great  suits  above  referred  to.  There  had  been  abundant 
provocation  in  the  past  relations  of  numerous  important 
railways  with  favored  communities  and  favored  corpora- 
tions; the  demand  for  regulation  was  urgent,  in  the  West 
especially;  and  the  Hepburn  Act,  passed  by  the  House  in 
February,  1906,  by  a  vote  of  346  to  7,  and  by  the  Senate  in 
June,  on  a  vote  of  71  to  3,  authorized  the  Interstate  Com- 
merce Commission,  on  complaint,  "to  determine  and  pre- 


1 86  PROGRESS  OF  THE   EMPIRE   STATE 

scribe  what  will  bethe  just  and  reasonable  rate  or  rates  .  .  . 
to  be  thereafter  observed  in  such  case  as  the  maximum  to 
be  charged."  It  further  declared  that  for  each  violation 
of  the  laws  by  a  railway's  officer  or  agent  a  fine  of  $5000 
should  be  imposed,  and  that  "every  distinct  violation  shall 
be  a  separate  offense,  and  in  case  of  a  continuing  violation, 
each  day  shall  be  deemed  a  separate  offense."  This  law 
is  an  important  landmark,  because  the  railway  interests 
have  ever  since  ascribed  to  it,  and  to  the  sweeping  powers 
conferred  on  the  interstate  tribunal,  the  financial  disorder 
of  the  ensuing  year.  It  became,  in  1908  and  1909,  the 
commonplace  of  every  annual  railway  report  to  ascribe 
the  panic  of  1907,  and  the  reduced  railway  traffic  which 
ensued,  to  the  Hepburn  Law  of  1906. 

The  law  was  undoubtedly  regarded  with  much  mis- 
giving by  the  railways;  it  was  dissected  and  opposed,  on 
grounds  of  constitutionality,  of  the  rights  of  property,  and 
of  the  dangerous  public  policy  invoked  through  committing 
such  powers  to  a  board  of  commissioners,  by  some  of  the 
ablest  Congressional  lawyers.  Yet  it  is  not  easy  to  doubt, 
conditions  being  what  we  have  seen  them  to  be  in  the  great 
corporations  of  the  country,  that  the  good  results  of  the 
Government's  policy,  taken  as  a  whole,  far  outweighed  the 
incidental  evils. 


, 


^-j^i/.  ^Y-^^^ 


JEREMIAH  WHIPPLE  JENKS 

oi  the  University  of  Michigan,  A.B.,  i ^ 7 .^ ,  A.M., 
LL.D.,  1903,  I'll. I).,  University  of  Halle  (Germany)  [885; 
if  Economics  and  Politics,  Cornel]  University  1891 
iyu;  Professor  of  Government  and  Director  of  the  D 
Public  Affairs,  New  York  University,  1912.  1899-1901  Expert 
Agent  of  the  United  States  Industrial  Commission  on  Investi- 
gation of  Trusts  and  Industrial  Combinations  in  the  United 
States  and  Europe,  and  Consulting  Expert  of  the  Department  of 
Labor  on  the  same  subject.  1901-2  Special  Commissioner  of  the 
War  Department  to  investigate  the  questions  of  currency,  labor, 
internal  taxation, and  police  in  the  Orient;  1903  Special  Expert  on 
Currency  Reform  of  the  Government  of  Mexico;  1903-4  Member 
of  the  United  States  Commission  on  International  Exchange,  in 
special  charge  of  reform  of  currency  in  China;  1907-11  Member 
of  the  United  States  Immigration  Commission.  Publications: 
The  Trust  Problem;  The  Immigration  Problem;  Principles  of  Poli- 
Citizenship  and  the  Schools;  Life  Questions  of  School  Boys; 
Making  of  a  Nation;  Great  Fortunes,  the  Winning,  the  Using,  1 
of  reports  on  Trusts  of  the  industrial  Commission;  reports  of  the 
Commission  on  International  Exchange.  Member  of  numerous 
economic  and  political  scientific  associations. 


CHAPTER  VI 

THE  DEVELOPMENT  OF  INDUSTRIAL 
COMBINATION 

BY  JEREMIAH  W.  JENKS  AND  WILLIAM  H.   LOUGH 

IT  is  well  known  that  a  majority  of  the  great  combina- 
tions of  the  country  have  been  planned,  and  in  large 
part  organized,  in  New  York  City.  A  distinction 
should  be  made,  however,  between  the  strictly  industrial 
and  the  financial  activities  of  combinations.  Many  con- 
cerns which  were  originally  financed  in  New  York  City,  and 
many  even  which  are  still  directed  from  New  York  offices, 
really  play  no  important  part  in  the  industrial  and  com- 
mercial life  of  the  city  or  the  State.  Such  concerns  we 
eliminate  from  the  present  discussion. 

Even  with  this  limitation  the  subject  is  by  no  means 
narrow.  Few  people  realize  the  industrial  greatness  of 
New  York  State.  Though  it  has  less  than  one  tenth  of  the 
population  of  the  United  States  within  its  borders,  it  has 
nearly  one  sixth  of  the  manufacturing  interests.  With  the 
single  exception  of  Pennsylvania,  no  other  State  even 
approaches  New  York  in  the  value  of  its  manufactured 
products.  Moreover,  the  supremacy  of  New  York  arises, 
not  from  concentration  of  capital  in  a  few  industries,  but 
from  well  distributed  activity  in  a  great  variety  of  industries. 
In  many  of  these  the  tendency  toward  combination  has 
been  strong,  so  that  our  subject,  limit  it  as  we  may,  covers 
a  wide  field. 

Until  within  the  last  few  years,  it  has  generally  been 

187 


1 88  PROGRESS  OF  THE   EMPIRE   STATE 

assumed  by  economists  that  free  competition  is  the  normal 
condition  of  business.  But,  as  a  matter  of  fact,  competition 
always  has  been  and  probably  always  will  be  restricted  to  a 
much  greater  extent  than  was  formerly  realized.  In  retail 
business,  prices  are  generally  fixed  partially  by  personal 
relations  between  the  buyer  and  the  seller,  and  not  wholly 
by  strictly  economic  motives.  In  addition,  there  is  an 
element  of  combination  in  most  lines  of  business,  as,  for 
instance,  the  associations  of  druggists,  of  grocers,  of  butchers, 
and  of  other  retail  merchants  which  frequently  exist  in  small 
communities  and  through  which  standard  prices  are  tacitly 
agreed  upon  and  made  known.  Likewise,  nearly  every 
line  of  manufacturing  has  its  own  national  society  or  associa- 
tion. Such  societies  may  exist  primarily  for  the  sake  of 
promoting  acquaintance  and  for  interchange  of  ideas; 
yet  the  very  fact  that  they  bring  competitors  together  in 
friendly  intercourse  fosters  a  half-unconscious  tendency 
toward  price  agreement.  Even  in  wholesale  lines,  where 
competition  is  more  nearly  unchecked,  informal  combina- 
tions and  agreements  among  dealers  nearly  always  play  an 
important  part.  The  formation  of  trade  associations  is  the 
first  stage  in  the  universal  movement  for  restriction  of 
competition,  although,  of  course,  these  associations  in 
themselves  exercise  only  an  uncertain  and  intermittent 
influence. 

The  effects  of  competition,  where  it  does  exist,  are  by 
no  means  always  the  same.  Much  depends  upon  whether 
the  industry  does  or  does  not  require  the  investment  of  a 
large  amount  of  fixed  capital.  In  those  lines  in  which  little 
capital  is  needed  and  in  which,  therefore,  new  firms  are 
constantly  rising  and  old  firms  disappearing,  the  result  of 
competition  is  to  eliminate  those  producers  whose  efficiency 
is  not  up  to  the  standard  of  the  industry  and  to  maintain 
the  price  of  the  product  at  about  the  normal  cost  of  produc- 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION    189 

tion  plus  a  reasonable  profit  for  most  producers.  Any 
efficient  concern  may  be  reasonably  certain  of  holding  its 
own.  The  kind  of  competition  that  we  call  "ruinous" 
cannot  long  exist,  for  the  simple  reason  that  the  offending 
houses  within  a  comparatively  short  time  drive  themselves 
into  bankruptcy. 

The  case  is  entirely  different  in  those  industries  in  which 
large  amounts  of  fixed  capital  are  required.  This  capital, 
once  invested,  cannot  be  withdrawn.  If  vigorous  compe- 
tition is  started,  the  price  of  the  products  may  be  forced 
down  far  below  the  level  of  the  cost  of  production,  and  yet 
production  will  go  on.  With  great  funds  of  capital  per- 
manently invested,  it  may  be,  and  frequently  is,  the  lesser 
evil  to  produce  at  a  loss  rather  than  to  allow  the  invested 
capital  to  lie  idle  and  gradually  waste  away.  In  industries 
of  this  kind,  competition  may  easily  become  "ruinous"  to 
every  one  concerned;  and,  as  a  natural  consequence,  an 
attempt  to  restrict  competition  through  combinations  is 
practically  inevitable. 

Unrestricted  competition  in  the  large-capital  indus- 
tries not  only  tends  to  drive  prices  so  low  that  goods  are 
produced  at  a  loss,  but  also  causes  waste  in  methods  of 
production  and  marketing.  The  most  common  forms  of 
waste  are: 

1.  The  difficulty  of  making  sales  in  a  competitive 
market  leads  to  excessive  expenditures  on  advertising,  on 
traveling  salesmen,  and  on  other  schemes  for  securing 
business. 

2.  The  pressure  of  competition  leads  to  the  extension 
of  credits  to  doubtful  firms. 

3.  Competing  firms  often  ship  large  quantities  of  goods 
into  each  other's  territories,  thereby  incurring  heavy  and 
unnecessary  transportation  charges. 

4.  Inferior  plants  frequently  turn  out  large  quantities 


190  PROGRESS  OF  THE   EMPIRE   STATE 

of  goods,  owing  to  reckless  and  wasteful  selling  methods, 
while  at  the  same  time  superior  plants  are  not  running  to 
their  full  capacity. 

5.  A  low  grade  of  business  ability  retains  control  of 
some  plants,  while  executive  genius,  on  the  other  hand,  does 
not  obtain  full  scope  for  action. 

6.  By-products  may  be  turned  out  by  each  plant  in 
such  small  quantities  as  to  be  practically  valueless,  whereas, 
if  combined,  they  could  be  made  to  yield  a  considerable 
income.  For  all  these,  and  other  less  important  reasons, 
industries  in  which  large  capital  must  be  invested  naturally 
tend  toward  combination. 

Here,  then,  are  the  two  underlying  factors  which  work 
most  effectively  toward  combination:  cut-throat  price- 
making  and  the  wastes  of  competitive  producing  and  market- 
ing. As  we  have  seen,  these  evils  almost  cure  themselves — 
in  industries  in  which  fixed  capital  investments  are  not  too 
large — by  the  rapid  elimination  of  concerns  which  cannot 
make  profits;  but  in  those  industries  which  require  large 
capital  investments,  heavy  losses  may  go  on  year  after  year 
without  relieving  the  situation.  Combination  is  the  only 
cure.  This  is  what  George  Stephenson,  the  great  inventor, 
had  in  mind  when  he  said  of  railroads  (and,  although  a  dis- 
tinction between  natural  and  capitalistic  monopolies  may 
be  made,  the  remark  applies  equally  well  to  many  other 
industries),  "Where  combination  is  possible,  competition 
is  impossible." 

It  would  seem  at  first  glance  that  combination,  which  is 
designed  to  maintain  fair  prices  and  stop  competitive  waste, 
must  necessarily  be  an  association  of  rival  companies. 
This  is,  in  fact,  the  usual  type  of  combination.  Two  or  three 
or  four  or  more  concerns,  which  have  been  bitterly  fighting, 
are  brought  together  under  a  common  management.  There 
is,  however,  another  type  of  combination,  which  in  the  last 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION    191 

ten  years  has  become  common — the  combination,  namely, 
of  supplementary  industries.  This  is  an  association  of  one 
or  more  companies  which  produce  the  raw  material  of  the 
industry  with  other  companies  which  manufacture  semi- 
finished products,  sometimes  including  also  companies 
which  turn  out  finished  goods  and  even  companies  which 
sell  those  goods  to  the  ultimate  consumers.  The  American 
Tobacco  Company,  which  carries  its  products  through  all 
stages  of  manufacture  and  sale  from  the  warehouse  to  the 
smoker,  is  an  excellent  example.  Such  concerns  are  tech- 
nically called  "integrated."  They  influence  prices  and 
stop  competitive  waste,  not  merely  through  direct  combina- 
tion with  rival  companies  (although  this  plan  is  at  times  also 
followed),  but  also  through  their  control  of  raw  and  half- 
finished  material.  The  distinction  between  combinations  of 
rival  industries  and  combinations  of  supplementary  indus- 
tries— between  lateral  expansion  and  vertical  extension — 
is  vitally  important. 

Combinations  are  not  always  formal;  the  essential 
elements  of  combination  may  be  present  in  a  simple,  tacit 
understanding  as  to  prices  and  methods  of  competition. 
It  is  generally  found,  however,  that  "gentlemen's  agree- 
ments" are  not  effective.  The  temptation,  ever-present 
to  each  member  of  the  combination,  to  secure  an  advantage 
through  some  secret  trick,  is  too  strong.  A  more  binding 
form  of  combination  is  called  for.  Among  the  forms  that 
have  been  tried  at  various  periods  are: 

1.  Pools,  either  to  divide  territory  or  to  restrict  output. 
They  have  been  successful  in  some  European  countries,  but 
not  in  England  or  America.  Our  common  law  is  distinctly 
hostile  to  such  agreements,  and  consequently  no  legal 
penalties  for  failure  to  live  up  to  pool  agreements  can  be 
enforced.  Indeed,  those  who  enter  into  pool  agreements 
are  in  danger  of  finding  themselves  entangled  in  the  criminal 


192  PROGRESS  OF  THE   EMPIRE   STATE 

law.     At  the  present  time,  pools  are  practically  non-existent 
in  this  country. 

2.  Selling  bureaus,  such  as  are  common  in  Europe;  the 
German  Steel  Kartell  is  the  best-known  example.  This 
form  was  tried  in  this  country  several  years  ago  by  the 
Michigan  Salt  Association.  It  has  proved  repugnant  to  the 
common  law,  and  for  that  reason  is  practically  unworkable 
in  this  country. 

3.  "Trusts,"  in  the  original  sense  of  that  word;  that 
is,  agreements  under  which  the  controlling  stock  of  each  of 
several  corporations  is  turned  over  to  a  group  of  trustees. 
These  trustees,  in  exchange  for  the  stock  of  the  various 
member  corporations,  issue  their  own  trust  certificates. 
This  must  be  clearly  distinguished  from  a  voting  trust 
within  a  corporation.  The  Standard  Oil  Trust,  the  Ameri- 
can Sugar  Trust,  and  other  great  combinations,  were 
originally  in  this  form;  but  after  1890,  they  were  compelled 
to  reorganize  on  account  of  decisions  of  the  State  courts, 
holding  this  form  of  combination  illegal. 

4.  Holding  corporations;  that  is,  corporations  which 
own  the  controlling  stock  of  other  corporations.  This  is 
the  modern  and,  at  present,  almost  the  universal  form  of 
combination.  In  many  respects,  it  is  a  somewhat  clumsy 
method  of  maintaining  control,  for  it  involves  a  great  deal 
of  clerical  and  legal  red-tape,  and  it  often  works  injustice 
to  minority  stockholders.  However,  although  in  reality 
in  its  working  it  is  substantially  the  same  as  the  "trust," 
it  seems  as  yet  to  be  workable  and  legal  in  form  and  there 
is  as  yet  no  reason  to  think  that  this  form  of  combination 
will  not  persist  indefinitely.  True,  the  United  States 
Supreme  Court  has  ordered  the  dissolution  of  the  Standard 
Oil  Company  and  of  the  American  Tobacco  Company;  but 
both  decisions  were  based  upon  specific  acts  which  were 
found  to  be  illegal,  not  on  any  inherent  illegality  in  the 


I 


HENRY  OSBORNE  HAVEMEYER 

Sugar  refiner;  born  in  New  York  City,  1847;  son  of  Frederick 
Christian  Havemeyer;  educated  in  public  and  private  schools; 
married    Louisine   W.    Elder.     Com  with    Havemeyer  & 

.  sugar  refiners,  first  as  member  of  firm,  then  manager;  after 
president  American  Sugar  Refining  (  nan  Coffee 

Trustee  of  the  Colonial  Trust  Co.; 
director  Alliance  Realty  Co.,  Brooklyn  Cooperage  Co.,  Br<« 
Elevator*  Milling  Co.,  Colonial  Safe  Deposit  Co.,  National  City 
Bank  of  New  York,  New  Jersey  &  New  York  Realty  &  Improve- 
ment Co.,  Palnur  Waterfront  Land  &  Improvement  Co.,  Penn- 
sylvania Stave  Co.     Died,  1907. 


THE  DEVEL0PMEN1   OF  INDUSTRIAL  COMBINATION    193 

form  of  combination.  The  great  majority  of  holding 
companies  will  probably  escape  legal  interference. 

Inasmuch  as  the  tendency  toward  combination  is 
strongest  in  those  industries  which  employ  large  amounts 
of  fixed  capital,  it  is  evident  that  increased  use  of  extensive 
plants  and  of  long  processes  of  manufacture  encourages 
the  formation  of  combinations.  This  is  the  reason  why 
industrial  combinations  have  become  so  numerous  and 
powerful  in  the  last  twenty-five  years.  They  are  the  by- 
products of  improvements  in  the  machinery  of  production 
and  transportation. 

The  salient  dates  in  the  history  of  the  Standard  Oil 
Combination — the  greatest  of  all  the  "trusts" — indicate 
the  progress  of  the  movement,  as  it  has  led  in  practically 
all  the  movements  that  had  an  industrial,  as  contrasted 
with  a  speculative,  foundation.  As  far  back  as  1867,  Mr. 
John  D.  Rockefeller,  then  one  of  the  rising  young  business 
men  of  Cleveland,  Ohio,  took  the  lead  in  organizing  the 
firm  of  Rockefeller,  Andrews  &  Flagler.  Five  previously 
independent,  or  practically  independent,  refineries  were 
absorbed  by  the  new  firm.  In  two  or  three  of  the  refineries, 
to  be  sure,  Mr.  Rockefeller  had  previously  been  the  control- 
ling factor;  yet  the  new  partnership  marked  a  step  in  advance 
of  anything  that  had  previously  been  accomplished  toward 
introducing  combination  and  stability  into  the  oil  business. 

In  1870,  this  firm  was  succeeded  by  the  Standard  Oil 
Company  of  Ohio,  which  had  a  capital  stock  of  $1,000,000 
and  produced  at  the  beginning  about  4  per  cent,  of  all  the 
oil  refined  in  this  country.  From  this  time  on,  the  progress 
of  the  combination  was  steady  and  rapid.  In  1872,  this  cor- 
poration, having  first  increased  its  capital  stock  to  $2,500,000, 
formed  an  "alliance"  with  five  competitors.  This  was  an 
association,  not  of  corporations,  but  of  friendly  stock- 
holders.    It  was  officially  known  as  the  Central  Association 


194  PROGRESS  OF  THE   EMPIRE  STATE 

of  Refiners.  During  the  years  following,  this  "alliance" 
accomplished  a  marvelous  extension  of  its  activities  and 
of  its  control  over  the  oil  industry.  Its  proportion  of 
the  production  of  refined  oil  in  the  United  States,  it  is 
claimed,  grew  from  4  per  cent,  in  1870  to  95  per  cent,  in 
1877.  No  doubt  much  of  this  increase  was  due  to  the 
combination's  enjoyment  of  advantageous  freight  rates. 
Much  of  the  gain  undoubtedly  was  due  also  to  the  su- 
perior business  capacity,  organizing  genius  and  courage 
of  Mr.  Rockefeller,  supplemented  by  those  of  Mr.  Payne, 
Mr.  Flagler,  Mr.  Harkness,  Mr.  Pratt,  Mr.  Archbold,  Mr. 
Rogers,  and  other  associates  who  were  from  time  to  time 
active  in  the  management  of  the  combination's  affairs. 

In  no  other  combination  has  the  industrial  side  been  so 
strongly  emphasized.  The  Standard  Oil  stock  has  never 
been  listed  on  the  exchanges,  and  there  has  been  little  specu- 
lation in  its  shares.  It  seems  to  be  a  principle  of  its  leading 
men  not  to  accept  directorships,  unless  they  are  able  to 
give  careful  personal  direction.  Usually  they  control  their 
companies  and  carry  the  responsibility.  Mr.  Rockefeller 
seems  to  have  been  preeminent  in  the  qualities  of  saving, 
of  judging  men,  of  not  permitting  sentiment  to  interfere 
with  business;  and  the  same  spirit  has  been  infused  into  his 
associates.  Many  of  his  present  associates  were  in  earlier 
days  his  rivals.  His  chief  counsel  for  many  years  was  chosen 
after  ability  had  been  shown  in  fighting  the  Standard 
Oil  Company.  No  feeling  of  personal  hostility  has  hindered 
his  recognition  of  ability. 

The  Standard  Oil  Company  from  the  early  days  has 
been  noted  for  its  savings  in  property  and  expenses  and 
energy.  It  is  its  own  manufacturer  wherever  that  will  pay. 
It  owns  its  own  fleet  of  ships,  its  own  pipe-lines.  Its  plants 
are  so  located  as  best  to  save  freights.  Its  supervision  of 
details  extends  to  the  smallest  matters;  its  organization  is 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION    195 

a  model.  Its  leading  men  have,  many  of  them,  been  widely 
known  for  their  broad-minded  generosity.  Even  that  has 
not  been  the  result  of  an  outburst  of  sentiment.  It  has 
been  managed  on  a  wisely  thought-out  plan.  From  the 
business  viewpoint  of  getting  the  largest  returns  with  the 
least  expenditure  of  energy,  and  of  doing  business  to  make 
profits  instead  of  speculating,  its  leaders  have  justly  been 
considered  preeminent. 

The  great  increase  in  its  size  made  the  loose  form  of  com- 
bination inefficient.  A  remedy  was  found  in  the  formation 
in  1882  of  the  Standard  Oil  [Trust,  a  form  of  organization 
which  has  already  been  briefly  described.  The  stockholders 
of  forty  corporations  turned  in  their  stock  to  the  nine 
trustees  selected  under  the  trust  agreement,  and;  received  in 
exchange  the  trustees'  certificates.  In  addition,  a  large  num- 
ber of  concerns  organized  as  partnerships  and  as  individual 
proprietorships,  turned  in  their  property,  and  received  trus- 
tees' certificates.  From  this  time  on,  the  combination, 
whatever  its  legal  form,  has  always  been  a  remarkably 
stable  and  efficient  organization,  and  up  to  the  present  time 
has  controlled  a  large  percentage  of  the  output  of  refined  oil. 

About  this  time,  the  combination  began  its  policy  of 
developing  the  manufacture  of  by-products,  a  source  from 
which  it  has  since  derived  a  large  portion  of  its  profits.  It 
also  started  the  export  business,  which  has  been  so  impor- 
tant a  factor  in  its  growth.  At  the  present  time,  the 
Standard  Oil  Combination  exports  about  90  per  cent,  of 
the  refined  oil  which  goes  out  of  the  United  States. 

By  a  decision  of  the  Supreme  Court  of  Ohio  in  1892,  the 
Standard  Oil  Trust  was  declared  an  illegal  combination,  and, 
in  obedience  to  the  decree  of  the  court,  was  shortly  afterward 
dissolved.  The  dissolution  did  not,  of  course,  break  up  the 
actual  combination  of  interests,  for  the  same  men  who  had 
been  trustees  remained,  as  individuals,  the  controlling  stock- 


196  PROGRESS  OF  THE   EMPIRE   STATE 

holders  in  the  separate  corporations.  Once,  again,  how- 
ever, this  loose  form  of  combination  became  unsatisfactory. 

Finally,  in  1899,  the  capital  of  the  Standard  Oil  Company 
of  Newjersey  was  increased  from  #10,000,000  to #100,000,000, 
and  the  greater  portion  of  the  stock  of  the  New  Jersey 
corporation  was  exchanged  for  the  stock  of  the  other 
affiliated  companies.  In  other  words,  the  Standard  Oil 
Company  of  New  Jersey  became  the  holding  company  of 
the  combination. 

The  combination  in  this  form  was  in  turn  decided  to  be 
"in  restraint  of  trade"  and  an  illegal  monopoly,  within  the 
meaning  of  the  Sherman  Anti-Trust  Law,  by  the  United 
States  Supreme  Court  in  May,  191 1.  The  combination 
was  given  six  months  to  dissolve,  but  was  not  excluded  from 
interstate  commerce  pending  the  dissolution.  The  decision 
did  not  point  out  the  way  in  which  the  company  should  dis- 
solve and  reorganize.  The  exact  method  of  dissolution  was, 
however,  agreed  upon  in  consultation  with  the  Government 
and  with  the  Court  and  thus  bore  the  stamp  of  official  ap- 
proval. The  principle  followed  in  the  dissolution  was  to 
give  each  stockholder  of  the  Standard  Oil  Company  of  New 
Jersey  his  proportionate  share  of  the  stock  of  the  thirty-three 
companies  in  the  combination.  These  companies  have  since 
been  operated  as  independent,  and  sometimes  competing, 
units. 

These  important  dates  in  the  history  of  the  Standard 
Oil  Combination  roughly  mark  the  stages  in  the  progress 
of  the  general  movement  toward  industrial  combination. 
Up  to  the  early  eighties,  there  were  only  loose  alliances. 
During  the  eighties,  a  few  great  "trusts,"  in  the  proper 
sense  of  that  term,  were  organized.  In  the  early  nineties, 
these  combinations  were  reorganized  under  the  holding 
corporation  form.  Up  to  1893  the  movement  was  not 
widespread.     In   that  year  the  securities  of  only  twenty 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION   197 

industrials  of  any  importance  were  listed  on  the  New  York 
Stock  Exchange.  From  1893  to  1897  the  business  depres- 
sion made  the  formation  of  great  enterprises  impossible. 
In  1898,  however,  the  movement  was  resumed,  and  during 
the  five  years  from  1898  to  1903  reached  the  culmination 
of  its  activity.  In  the  three  years  1898-1900,  149  large 
combinations,  with  a  total  capitalization  of  #3,578,650,000, 
were  formed.  The  great  majority  of  the  large  combina- 
tions now  existent  were  formed  in  those  five  years.  Since 
1903  only  a  few  combinations  of  any  importance  have  been 
organized.  The  leading  industries  suitable  for  such  organiza- 
tion were  already  so  combined  before  1903.  The  decisions 
of  the  United  States  Supreme  Court  in  191 1,  requiring  the 
dissolution  of  the  Standard  Oil  Combination  and  of  the 
American  Tobacco  Combination,  have  caused  some  uncer- 
tainty as  to  the  stability  of  the  other  great  combinations. 

This  hasty  review  gives  us  the  setting  for  a  somewhat 
more  detailed  study  of  the  industrial  combinations  of  New 
York.  New  York  City  has  been  the  headquarters  of  the 
whole  movement.  New  York  State,  outside  the  city,  has 
played  a  most  important  part  in  the  underlying  pro- 
gress which  has  favored  the  growth  of  combinations.  We 
shall  see,  working  here  at  their  highest  speed,  the  forces 
which  have  brought  about  the  development  of  industrial 
combinations. 

It  is  helpful  to  classify  industrial  combinations,  in  a 
rough  and  ready  fashion,  into  two  groups — the  big  nation- 
wide  trusts,  which  usually  deal  in  the  necessities  of  physical 
or  industrial  life,  and  the  smaller  combinations,  which 
usually  produce  specialties  rather  than  staples.  Just  as 
with  many  other  useful  classifications,  it  is  impossible  to 
draw  a  sharp  line.  The  two  groups,  however,  are  plainly 
distinct  in  their  methods  of  formation  and  operation. 
Without  attempting  to  make  an  exhaustive  list  of  all  the 


198  PROGRESS  OF  THE   EMPIRE   STATE 

industrial  combinations  that  are  important  to  New  York 
State,  it  will  be  helpful  to  name  some  examples  of  each 
group. 

Combinations  which  belong  to  the  first  group  are: 

Organized  in:  Title  of  Present  Holding  Corporation 

1872  Standard  Oil  Company 

1887  American  Sugar  &  Refining  Company 

1 890  American  Tobacco  Company 

1899  Amalgamated  Copper  Company 

American  Smelting  and  Refining  Company 
1901  United  States  Steel  Corporation 

These  dates,  as  well  as  those  in  the  following  paragraph, 
are  chosen,  somewhat  arbitrarily  in  a  few  cases,  as  marking 
the  beginnings  of  the  combinations.  They  are  not  neces- 
sarily the  same  as  the  dates  of  incorporation  of  the  present 
holding  companies. 

Among  the  combinations  of  the  second  group,  which  have 
interests  in  New  York  State,  are: 

Organized  in:  Title  of  Present  Holding  Corporation 

1890  National  Casket  Company 
National  Saw  Company 

1 89 1  American  Wringer  Company 

1892  General  Electric  Company 
United  States  Rubber  Company 

1893  Central  Leather  Company 
Union   Typewriter   Company 
United   States  Whip  Company 

1895  Mergenthaler  Linotype  Company 

1896  Central    Fireworks   Company 

1897  American  Malt  Corporation 

1898  American  Thread  Company 
International  Paper  Company 


JAMES  HOWELL  POST 

;ar   refiner;    born   New  1  New  York,  October  13, 

in  public  schools.  Began  business  as  a  clerk  with 
B.  H.  Howell,  Son  &  Company  in  1874,  and  became  a  partner  in 
the  firm  in  1889.  President  of  National  Sugar  Refining  Company 
of  New  Jersey;  director  National  City  Bank  of  New  York; 
trustee  Williamsburg  Savings  Bank,  London  Assurance  Corpora- 
tion; director  and  treasurer  Cuban-American  Sugar  Company 
and  various  other  sugar  companies;  director  United  States 
Realty  and  Improvement  Company,  Nassau  Trust  Company, 
Franklin  Trust  Company,  and  various  other  companies.  Trustee 
Industrial  School  Association  of  Brooklyn,  Young  Men's  Chris- 
tian Association  of  Brooklyn,  Bureau  of  Charities,  Brooklyn 
Hospital  and  Dispensary,  and  South  Third  Street  Presbyterian 
Church. 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION   199 

Organized  in:  Title  of  Present  Holding  Corporation 

1898  Otis  Elevator  Company 
National  Biscuit  Company 

1899  Electric  Boat  Company 
General  Asphalt  Company 
General  Chemical  Company 
International  Steam  Pump  Company 
National  Enameling  and  Stamping  Company 
American  Shipbuilding  Company 
American  Car  and  Foundry  Company 
Niles-Bement-Pond  Company 
American  Ice  Securities  Company 
Royal  Baking  Powder  Company 

Union  Bag  and  Paper  Company 

U.  S.  Cast  Iron  Pipe  and  Foundry  Company 

American  Chicle  Company 

Standard  Milling  Company 

1900  International  Time  Recording  Company 
New  York  and  Kentucky  Company 
Casein  Company  of  America 

1901  Eastman  Kodak  Company 

H.  W.  Johns-Manville  Company 
National  Electric  Lamp  Company 
William  A.  Rogers,  Ltd. 
American  Can  Company 
Union  Mills 

United   Drygoods  Companies 
American  Locomotive  Company 
International  Salt  Company 

1902  Butterick   Company 
National  Licorice  Company 
Railway  Steel  Spring  Company 
Corn  Products  Refining  Company 

1903  Standard  Wall  Paper  Company 


200  PROGRESS  OF  THE   EMPIRE   STATE 

Organized  in:  Title  of  Present  Holding  Corporation 

1903  Aeolian-Weber  Piano  and  Pianola  Company 

1904  American-La  France  Fire  Engine  Company 

1905  Ingersoll-Rand  Company 
1909  Siegel  Stores  Corporation 

191 1         American  Bank-Note  Company 

Even  a  casual  glance  at  these  two  lists  reveals  certain 
striking  facts.  We  see,  for  instance,  how  large  a  percentage 
of  our  trusts  were  formed  in  the  five  years,  1 898-1903, 
inclusive;  and  of  these  nearly  half  were  organized  in  the 
one  year,  1899.  We  note  further  that  of  the  eight  great 
combinations,  five  were  in  existence  prior  to  1893;  and  the 
chief  exception  is  more  apparent  than  real.  The  United 
States  Steel  Corporation,  as  is  well  known,  is  chiefly  a 
combination  of  several  preexisting  combinations  that  had 
been  organized  some  years  before  1901.  We  may  say  in 
general — and  this  remark  applies  as  well  to  combinations 
outside  the  scope  of  this  article — that  the  great  trusts  were 
the  ones  first  formed,  and  the  lesser  trusts  were  more  or  less 
conscious  imitations.  In  some  cases,  they  appear  to  have 
been  organized  more  for  the  sake  of  putting  profits  into  their 
promoters'  pockets  than  because  there  was  any  urgent 
economic  need  for  them. 

These  generalities,  however,  must  be  applied  with 
caution.  Each  combination  has  its  own  peculiarities  and, 
if  it  is  to  be  judged  fairly,  must  be  separately  considered. 
Without  attempting  to  discuss  each  combination  in  detail, 
a  few  typical  cases  will  illustrate  the  process  of  development. 

The  present  American  Sugar  Refining  Company  was 
incorporated  in  New  Jersey  in  1891  to  take  over  the  entire 
assets  and  business  of  the  Sugar  Refineries  Company,  better 
known  as  the  Sugar  Trust.  This  latter  company  had  been 
formed  under  the  leadership  of  Mr.  H.  O.  Havemeyer  in 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION  201 

1887  to  absorb  the  leading  sugar  refineries  of  the  country 
then  in    operation;   and    during  most   of  its    history,  Mr. 
Havemeyer's  able,  bold,  dominating  personality  was  the 
chief  controlling  factor  in  its  development  and  policy.     The 
United  States  Industrial  Commission  in   1900  brought  to 
light  the  underlying  reasons  for  the  formation  of  the  combina- 
tion.    Before    1887   there  were  forty  competitive   plants. 
The  sugar  industry  is  one  of  the  best  examples  of  the  type, 
referred  to  earlier  in  this  article,  of  business  which  requires 
a  heavy  investment  in  plant,  machinery,  and  other  forms  of 
fixed  capital.     Hence,  the  forty  plants  were  all  bent  on 
extending  their  sales,  even  though  prices  were  below  the 
total   cost  of  refining  sugar.     The   inevitable   result  was 
bitter    and    ruinous    warfare.     Between    1884    and     1887 
eighteen  of  the  forty  plants  went  into  receivers'  hands. 
The  failed  concerns,  of  course,  went  on  competing  even 
more  recklessly  than  those  which  remained  solvent.     Into 
this  chaos  some  order  was  introduced  by  the  formation  of 
the  Sugar  Refineries  Company. 

This  company  was  a  "trust,"  in  the  legal  sense.  Each 
member  entered  into  a  contract  to  pool  all  properties, 
establishing  a  single  and  absolute  ownership,  and  to  receive 
in  return  trust  certificates  representing  its  proportion  of  the 
combined  property  and  profits.  By  November,  1887, 
fifteen  concerns  had  joined  the  combination.  Five  of  the 
plants  shortly  after  were  closed  and  the  efficiency  of  the 
other  ten  was  developed  to  a  high  point.  For  two  years 
the  Sugar  Refineries  Company  earned  large  profits. 

In  1889,  however,  these  profits  attracted  three  new  and 
powerful  competitors  into  the  field — Claus  Spreckels  in 
Philadelphia,  Arbuckle  Brothers,  and  Claus  Doscher  in 
New  York.  Competition  again  became  severe  and,  al- 
though the  smaller  number  of  competitors  and  better 
understanding  of  the  situation  prevented  the  recklessness 


202  PROGRESS  OF  THE   EMPIRE  STATE 

which  had  marked  the  first  era  of  competition,  the  profits 
of  the  Sugar  Refineries  Company  were  much  decreased. 
At  the  same  time  the  company  was  attacked  in  the  New 
York  State  political  campaign,  and  proceedings  for  its 
dissolution  were  threatened.  Feeling  itself  legally  insecure, 
after  the  decision  of  the  Ohio  Supreme  Court  dissolving  the 
Standard  Oil  Trust,  and  being  anxious  to  escape  political 
attacks,  the  managers  of  the  combination  determined  to 
reorganize.  In  1891  the  American  Sugar  Refining  Company 
of  New  Jersey  was  incorporated. 

The  entire  capital  stock  of  the  new  company,  consisting 
of  #25,000,000  preferred  and  #25,000,000  common  stock, 
was  issued  in  exchange  for  the  assets  of  the  Sugar  Refineries 
Company  plus  #11,000  cash.  The  company's  official  circu- 
lar estimated  the  value  of  real  estate  and  plants  taken  over 
at  #41,250,000  and  the  cash  assets  and  investments  at 
#8,750,000.  In  1892,  the  stock  issue  was  increased  to 
#75,000,000,  in  order  to  provide  for  the  purchase  of  com- 
peting refineries,  the  most  important  of  which  were  the 
Franklin  Sugar  Company  and  the  Spreckels  Sugar  Refining 
Company.  By  these  purchases  and  by  better  understanding 
with  other  concerns,  the  severity  of  competition  after  1894 
was  much  abated.  The  six  years  1894  to  1900  were  the  most 
prosperous  in  the  history  of  the  Sugar  Combination. 

In  1900,  a  new  combination,  the  National  Sugar  Refining 
Company,  appeared  in  the  field.  This  was  a  consolidation 
of  three  formerly  independent  plants  in  the  vicinity  of  New 
York.  An  able  group  of  sugar  men,  including  Mr.  James 
H.  Post  and  Mr.  F.  C.  Mollenhauer,  were  active  in  its  for- 
mation and  have  since  administered  the  company's  affairs. 
The  exact  relations  between  this  company  and  the  American 
Sugar  Refining  Company  were  for  many  years  obscure.  It 
has  now  developed,  however,  that  the  American  Company 
was  the  owner,  from  the  beginning,  of  something  over  one 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION   203 

half  of  the  preferred  stock  and  that  the  late  H.  O.  Havemeyer, 
former  president  of  the  American  Sugar  Refining  Company, 
received  #9,300,000  of  the  common  stock.  This  explains 
the  harmony  which  has  always  been  apparent  between  the 
two  companies.  The  National  Company,  throughout  its 
semi-independent  existence,  has  been  financially  successful. 

Serious  competition  began  to  be  felt  in  1900  from  the 
beet-sugar  industry.  The  American  Beet  Sugar  Company, 
a  combination  of  some  of  the  leading  plants,  was  incorpo- 
rated in  1899.  In  the  few  years  following,  various  smaller 
beet-sugar  concerns  grew  into  prominence.  At  present 
there  are,  it  is  said,  more  than  sixty  beet-sugar  plants  of 
some  importance  in  the  country.  The  relations  between 
the  American  Sugar  Refining  Company  and  the  beet-sugar 
interests  are  not  definitely  known,  but  it  is  generally  believed 
that  the  American  Company  has  a  controlling  influence  in 
the  beet-sugar  industry. 

Nevertheless,  it  is  certain  that  the  profits  of  the  Sugar 
Combination  were  much  reduced  after  1900.  In  1891,  8  per 
cent,  was  paid;  in  1892,  9  per  cent. ;  in  1893,  11  ]4  per  cent. ; 
in  1894-1899,  annually,  12  per  cent.;  in  1900,  7^  per  cent.; 
and  since  1900,  7  per  cent,  annually.  The  amount  of 
common  stock  has  been  somewhat  increased,  but  not  enough 
to  compensate  for  the  diminution  in  dividends. 

Very  few  facts  as  to  the  extent  of  the  Sugar  Combina- 
tion's control  over  the  industry  are  available.  In  a  petition 
against  the  Company  for  alleged  violation  of  the  Sherman 
Anti-Trust  Law,  filed  by  the  United  States  Government  in 
November,  1910,  it  is  claimed  that  the  Company  controls 
about  72  per  cent,  of  the  output  of  refined  sugar  in  this 
country,  excluding  beet  sugar,  and  about  70  per  cent., 
including  beet  sugar.  In  reply,  the  Company  claims  that 
it  is  not  a  producer  of  raw  sugar,  does  not  and  cannot  control 
the  price  of  raw  sugar,  is  daily  meeting  intense  competition 


204  PROGRESS  OF  THE   EMPIRE   STATE 

in  selling  refined  sugar,  and  controls  not  more  than  51  per 
cent,  of  the  national  output  of  refined  sugar.  The  Company 
further  sets  forth  that  the  price  of  granulated  sugar  in  New- 
York  City  has  declined  since  1870  from  13.5  cents  per  pound 
to  4.76  cents.  Much  of  this  decline  would  normally  come 
with  the  progress  of  the  industry.  An  investigation  under- 
taken by  the  writer  in  1900  for  the  Industrial  Commission 
made  it  plain  that  the  Sugar  Combination  up  to  that  time 
had  fixed  prices  at  high  figures  whenever  it  could  sup- 
press competition.  As  competition,  however,  had  never 
been  completely  eliminated  for  any  long  period,  it  did 
not  appear  that  prices,  on  the  whole,  had  been  raised 
permanently  much  above  their  normal  level.  The  ten- 
dency was  there,  but  was  somewhat  restricted  in  its 
working.  The  Sugar  Combination,  unlike  some  of  the 
other  combinations,  has  exercised  little  influence  toward 
steadying  prices. 

The  Sugar  Combination  has  never  been  free  from  a  great 
deal  of  popular  antagonism.  It  deals  in  one  of  the  most 
common  necessaries  of  life.  There  have  been  many  com- 
plaints of  the  treatment  of  its  workmen.  There  have  been 
startling  revelations  from  time  to  time  as  to  the  Company's 
methods  of  dealing  with  competitors,  as  in  the  well-known 
Pennsylvania  Sugar  Refining  case,  and,  even  more  serious, 
as  to  the  frauds  practiced  by  certain  of  its  employees  in 
evading  customs  duties.  The  most  potent  factor,  however, 
in  promoting  its  unpopularity,  has  undoubtedly  been  the 
Company's  former  policy  of  secrecy  as  to  all  its  operations. 
The  violent  fluctuations  in  the  value  of  its  stock  have  led 
many  to  believe  that  the  directors  were  at  times  using  their 
inside  knowledge  at  the  expense  of  other  stockholders, 
though  this  belief  could  probably  not  be  substantiated. 
President  Havemeyer's  defense  of  this  policy  of  concealment 
at  the  annual  meeting  of  the  Company  in  1894  is  especially 


FREDERICK  D.  MOLLENHAUER 

Suga  bom  in  New  York  City;  son  of  John  and  Doris 

sihauer;   married  in  Brooklyn,  N.  Y.,   1890,    May  Craig. 

Secretary,  treasurer,  and  director   Mollenhauer  Sugar   Refining 

Co-:  r,    and    director     National     Sugar 

Refining     Co.,   of    New    Jersey;    vice-president,    treasurer, 

ling  Co.;  vice-president  and 
lizens'  Union  Realty  &  Mortgage  Co.;  member  ad, 
commission  United  States  Lloyds;  trustee  Nassau  Trust  Co. 
director  Central  Aguirre  Sugar  Co.,  Cuban-American  Sugar  Co., 
Fajardo  Sugar  Co.,  Manufacturers'  National  Bank,  St.  Regis 
Paper  Co. 


.    I 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION  205 

interesting  because  it  is  typical  of  the  attitude  of  many 
industrial  executives.     He  said: 

"We  have  at  present  13,000  stockholders.  Any  informa- 
tion which  they,  as  a  body,  ask  for,  the  directors  will  at  all 
times  be  prepared  to  furnish.  Up  to  the  present  time 
stockholders  have  determined  that  special  information  shall 
not  be  given  to  individual  stockholders.  ...  A  year 
ago,  I  made  the  point  that  a  business  corporation  is  an 
aggregation  of  individuals  and  that  there  were  obvious 
objections  to  giving  to  competitors  information  about 
corporate  affairs." 

From  one  point  of  view  this  opinion  has  justification, 
but  it  is  a  narrow  point  of  view  and  one  which  has  been  dis- 
carded by  the  great  majority  of  large  corporations.  The 
present  management  of  the  American  Sugar  Refining 
Company  has  abandoned  the  policy  of  extreme  secrecy  and 
in  so  doing  has  effected  a  praiseworthy  reform. 

The  Amalgamated  Copper  Company  is  the  greatest 
combination  in  the  mining  field.  It  was  incorporated  under 
New  Jersey  laws  in  1899,  and  at  once  acquired,  in  exchange 
for  $154,000,000  of  its  own  stock,  the  controlling  interest 
in  eight  previously  independent  mining  and  smelting 
companies,  and  in  the  United  Metals  Selling  Company,  a 
marketing  agency.  The  initial  financing  of  the  combination 
was  remarkable  for  the  public  interest  aroused,  as  well  as 
for  the  conflicting  accounts  which  have  since  been  given  as 
to  the  inner  facts.  It  is  not  yet  possible  to  disentangle  the 
inaccuracies  and  exaggerations  of  these  accounts  and  to 
set  forth  the  exact  truth.  Its  stock  has  been  regarded  from 
the  beginning  as  a  distinctly  speculative  security;  and 
indeed  this  is  inevitable,  in  view  of  the  great  fluctuations 
in  the  value  of  raw  copper  and  the  consequent  fluctuations 
in  the  earnings  of  the  Copper  Combination.  The  parent 
company  has  reported  surpluses  for  several  years  over  its 


206  PROGRESS  OF  THE   EMPIRE   STATE 

stock  dividends,  but  this  favorable  showing  is  accompanied 
by  a  long  series  of  deficits  in  the  income  account  of  its  chief 
subsidiary,  the  Anaconda  Copper  Mining  Company.  The 
Amalgamated  Copper  Company  is  an  instance  of  a  combina- 
tion which  does  not  control  a  sufficient  proportion  of  the 
output  to  exercise  a  steadying  influence  on  prices.  Hence, 
it  has  been  unable  to  achieve  financial  stability. 

It  has  been  asserted  that  the  original  purpose  of  the 
organizers  of  the  Amalgamated  Copper  Company  was  to 
make  its  formation  simply  the  first  step  toward  a  much 
greater  combination  of  all  copper-producing  interests. 
Negotiations  looking  toward  further  combination  in  this 
field  were  reported  by  the  financial  papers  to  have  been 
under  way  in  1909  and  1910.  They  were  apparently 
abandoned,  however,  for  the  time  being. 

The  first  American  Tobacco  Company  (not  the  present 
corporation)  was  chartered  in  New  Jersey  in  1890.  At  the 
time  of  its  organization,  it  acquired  all  the  property,  in- 
cluding plant  and  good  will,  of  five  well-known  concerns 
which  were  engaged  chiefly  in  the  manufacture  of  cigarettes. 
Mr.  James  B.  Duke  was  the  first  president,  and  has  ever 
since  retained  the  leadership  of  the  combination.  In  Mr. 
Duke  again  (as  in  Mr.  Henry  O.  Havemeyer  in  sugar 
refining),  the  tobacco  industry  found  a  leader  who  knew  the 
business  from  end  to  end  and  who  had  the  ability,  the 
courage,  and  the  masterful  personality  to  command  his 
following.  Practically  every  one  of  the  great  combinations 
has  produced  a  leader  of  preeminent  qualifications.  The 
original  capitalization  was  $25,000,000.  The  exhaustive 
report  of  the  Commissioner  of  Corporations  on  the  tobacco 
industry,  from  which  the  facts  stated  in  this  review  are 
largely  drawn,  is  authority  for  the  statement  that  this 
company  had  control  at  the  beginning  of  over  90  per  cent, 
of   the    cigarette    business   of   the    country.     It   achieved 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION  207 

immediate  prosperity,  and  during  the  period  from  1890  to 
1895  earned  average  profits  of  over  #4,000,000  annually. 

The  Company  at  once  began  to  extend  its  activities. 
In  1 89 1,  its  authorized  capital  was  increased  to  #35,000,000, 
and  it  bought  the  property  of  four  important  concerns  which 
manufactured  smoking  tobacco,  snuff,  chewing  tobacco, 
and  cheroots.  It  developed  the  plug  tobacco  business  with 
especial  energy,  and  during  the  years  from  1894  to  1897 
entered  into  a  bitter  competitive  warfare  with  the  other 
plug  manufacturers  of  the  United  States.  The  combina- 
tion's leading  brand,  "Battle-Ax,"  was  sold  at  times  below 
the  cost  of  production.  As  a  result,  the  Company's  profits 
were  temporarily  cut,  and  in  the  last  quarter  of  1895  the 
usual  dividend  on  the  common  stock  was  omitted. 

By  1898  some  of  the  leading  competitors  of  the  Company 
in  the  plug  tobacco  business  were  ready  to  capitulate.  In 
that  year  the  Company  bought  outright  two  important 
plug  manufacturing  concerns.  In  December,  1898,  a  new 
combination  of  plug  manufacturers,  the  Continental  To- 
bacco Company,  was  formed.  It  took  over  all  the  plug 
business  of  the  American  Tobacco  Company,  and  absorbed 
seven  of  the  Company's  leading  competitors.  The  Conti- 
nental Tobacco  Company  issued  approximately  #100,000,000 
of  stock,  half  preferred  and  half  common.  A  little  over 
one  third  went  directly  into  the  treasury  of  the  American 
Tobacco  Company  in  payment  for  its  plug  manufacturing 
business.  The  individual  stockholders  of  the  American 
Tobacco  Company  had  a  large  enough  additional  interest 
in  the  Continental  Tobacco  Company  to  insure  harmonious 
relations  between  the  two. 

During  the  same  eventful  year,  1898,  a  group  of  promi- 
nent financiers  formed  the  Union  Tobacco  Company,  a 
combination  of  some  of  the  important  concerns  which  were 
independent  of  American  Tobacco.     For  a  time  a  disastrous 


I 


208  PROGRESS  OF  THE   EMPIRE  STATE 

war  between  the  two  combinations  was  threatened.  Before 
long,  however,  peace  was  declared  and  a  deal  was  made 
under  which  the  stockholders  of  the  Union  Tobacco  Com- 
pany exchanged  their  holdings  for  stock  of  the  American 
Tobacco  Company.  In  this  way  the  Union  Tobacco  group, 
composed  of  Thomas  F.  Ryan,  P.  A.  B.  Widener,  Anthony 
N.  Brady,  W.  C.  Whitney,  and  Thomas  Dolan,  became  an 
important  factor  both  in  the  American  Tobacco  Company 
and  in  the  allied  Continental  Tobacco  Company.  At  about 
the  same  time,  several  of  the  cigarette  manufacturers  who 
had  joined  the  American  Tobacco  combination  at  the  start 
became  dissatisfied  with  the  new  policy  of  reaching  into  new 
fields  of  tobacco  manufacture  and  sold  their  stock.  Thus 
the  financiers  who  had  organized  Union  Tobacco  came  into 
practical  control.  In  1899  tne  authorized  common  stock 
of  the  American  Tobacco  Company  was  increased  from 
$2 1,000,000  to  #56,000,000  and  a  100  per  cent,  stock  dividend 
was  declared. 

The  next  step  of  the  American  Tobacco  Combination 
was  to  start  a  vigorous  campaign  for  control  of  the  snuff 
trade.  In  1899,  three  snuff  concerns  were  purchased.  Their 
output,  added  to  that  previously  owned  by  the  American 
and  Continental  companies,  gave  the  combination  about 
one  third  of  the  snuff  trade  of  the  country.  An  independent 
combination,  however,  the  Atlantic  Snuff  Company,  was 
still  stronger  in  this  branch  of  the  tobacco  business.  After 
a  brief  struggle,  the  two  parties,  with  one  important  estab- 
lishment outside  either  combination,  cooperated  in  forming 
the  American  Snuff  Company,  which  from  the  beginning 
controlled  four  fifths  of  the  output  of  snuff. 

By  1900  the  Tobacco  Combination  was  the  dominant 
factor  in  the  cigarette,  the  plug,  the  smoking  tobacco,  and 
the  snuff  business  of  the  United  States.  The  cigar  trade, 
however,  had  scarcely  been  touched.     At  first  sight  it  would 


ANTHONY  NICHOLAS  BRADY 

litalist;  born  in  Lil  ugust  22,  1843;  can 

parents  in  childhood;   attended  school  until 
thirteen  years  old.     I  my,  V  V-.,  in  1864; 

til  he  had  practical  control  of 

ntrol  of  large  granite 

quarrii  te  largely  interested  in  gas  and  electric  lighting 

icago,  New  York,  and  other 
,  and  in  traction  lines  in  New  York  City  and  elsewhere. 
His  first  public  service  enterprise  was  the  starting  of  the  Albany 
which  he  accomplished  with  the  help  of  Roswell 
P.  Flower  and  1  diet.     He  first  appeared  in  New  York 

as  one  of  the  or  the  Metropolitan  Traction  Co.,  and  in 

1887  ;  ganization  of  the  Brooklyn  Rapid 

Transit  Co.,  in  which  he  was  chairman  of  the 

the  time  of  his  death.     He  was  also  very  active  in  the  New  York 
Edison  Co.,  in  which  he  was  succeeded  by  his  son  Nichol 
Brad;  ,  ted  president  of  the  Company  rn  April,  1 9 1 3 . 

Anthony  N.  Brady  was  1  tor  Edison  Electric 

Illuminating  (  1  i.lyn,  Kings  Co.  Electric  Light  &  P 

Co.;  trustee  Consolidated  Ga  ew  York;  director  Ameri- 

can T  I  e  Hudson  Companies,  National  Surety  Co., 

United   States   Rubber   (  I  inghouse   Electric   &   Manu- 

facturing Co.,  and  many  other  corporations.     Died  in  London, 
England,   July   22,    1913. 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION    209 

have  seemed  hopeless  to  try  to  form  an  important  combina- 
tion of  cigar  manufacturers.  Cigars  are  made  in  thousands 
of  small  shops,  little  expensive  machinery  is  required,  and 
skill  in  handling  and  rolling  tobacco  is  not  uncommon. 
These  are  precisely  the  conditions  to  favor  a  continuous 
competition.  As  a  matter  of  fact,  the  American  Tobacco 
people  never  have  so  far  overcome  all  these  handicaps  as  to 
establish  control  of  the  cigar  business.  But  they  have 
succeeded  in  becoming  by  far  the  largest  single  factor. 

The  American  Cigar  Company,  organized  in  1901  with 
a  capital  stock  of  #10,000,000,  took  over  most  of  the  cheroot 
and  small  cigar  business  of  the  American  and  Continental 
companies  and  acquired  the  Havana-American  and  one  or 
two  other  important  outside  concerns.  By  1903  it  turned 
out  about  one  sixth  of  the  output  of  the  United  States. 

As  a  method  of  raising  additional  cash  and  to  bring 
about  a  closer  union  of  the  affiliated  companies,  the  Con- 
solidated Tobacco  Company  was  incorporated  in  1901. 
The  capital  stock,  #30,000,000,  was  paid  for  in  cash  by  a 
group  of  the  leaders  in  the  Tobacco  Combination.  Consoli- 
dated four  per  cent,  fifty-year  collateral  trust  bonds  were 
offered  for  exchange  at  the  rate  of  #100  for  each  #100  par 
value  of  Continental  stock  and  at  the  rate  of  #200  for  each 
#100  of  American  stock,  the  bonds  to  be  secured  by  deposit 
with  a  trustee  of  all  the  stock  thus  received.  In  view  of  the 
facts  that  Continental  common  had  never  obtained  a  divi- 
dend and  American  common  was  on  only  a  6  per  cent,  basis, 
the  offer  was  remarkably  attractive  and  was  quickly  ac- 
cepted by  nearly  all  the  stockholders  of  the  two  older 
companies.  The  organizers  of  the  Consolidated,  however, 
knew  what  they  were  about.  They  foresaw  great  profits, 
partly  as  a  result  of  an  approaching  reduction  in  the  internal 
revenue  taxes,  and  to  secure  these  profits  were  willing  to 

advance  a  large  sum  of  money  and  to  guarantee  to  the  other 
14 


210  PROGRESS  OF  THE   EMPIRE   STATE 

stockholders  a  greater  income  than  they  had  previously 
received.  Their  optimism  was  justified.  Within  a  little 
over  three  years  following  the  formation  of  the  Consolidated, 
profits  were  earned,  over  and  above  interest  on  the  bonds, 
of  approximately  #30,000,000. 

Part  of  the  #30,000,000  new  cash  brought  into  the  com- 
bination by  the  sale  of  Consolidated  stock  was  used  to 
develop  export  trade.  From  the  beginning  in  1890,  the 
American  Tobacco  Company  had  sought  to  extend  its 
foreign  sale  of  cigarettes,  and  had  established  several  sub- 
sidiary companies  abroad.  In  1901,  the  combination  deter- 
mined to  make  itself  felt  in  Great  Britain.  Control  of 
Ogden's  Limited,  a  large  English  company,  was  purchased 
for  something  over  #5,000,000,  and  a  vigorous  campaign 
was  started.  In  self-defense,  the  British  manufacturers 
formed  their  own  combination,  the  Imperial  Tobacco 
Company.  After  a  year's  hard  fighting,  one  of  the  most 
remarkable  and  far-reaching  industrial  agreements  yet 
established  was  effected  through  the  skillful  diplomacy  of 
Mr.  Thomas  F.  Ryan.  Under  this  agreement,  the  American 
Tobacco  Combination  gave  up  its  business  in  Great  Britain 
and  Ireland,  and  the  Imperial  Tobacco  Company  obligated 
itself  not  to  sell  in  the  United  States,  its  dependencies,  or 
Cuba.  Both  companies  joined  in  the  formation  of  a  third 
combination,  the  British-American  Tobacco  Company, 
chartered  under  English  laws,  which  operates  throughout 
the  rest  of  the  world.  In  this  company  the  American 
Tobacco  Combination  has  about  a  two  thirds  and  the 
Imperial  Company  a  one  third  interest.  The  British- 
American  Company  took  over  all  the  export  factories, 
offices,  and  good  will  of  its  two  organizers.  Since  its 
formation,  it  has  made  great  progress  in  extending  its 
control. 

Another  use  for  part  of  the  cash  capital  of  the  Consoli- 


HIE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION  211 

dated  Company  was  found  in  the  purchase  of  two  large 
Cuban  cigar  manufacturing  establishments,  the  stock  of 
which  went  into  the  treasury  of  the  American  Cigar  Com- 
pany. This  company  also  took  the  controlling  stock  of  a 
new  subsidiary,  the  American  Stogie  Company. 

A  change  in  the  form  of  combination,  which  had  pre- 
viously been  considered,  was  put  into  effect  shortly  after 
the  Northern  Securities  decision  in  1904.  The  Consolidated 
Tobacco  Company,  a  holding  corporation,  was  succeeded 
by  a  new  American  Tobacco  Company,  which  was  an  actual 
merger  of  the  Consolidated,  the  Continental,  and  the  first 
American  Tobacco  companies.  Legally,  a  merger  ends  the 
corporate  existence  of  each  absorbed  company.  Its  use  is 
infrequent,  partly  on  account  of  the  usual  difficulty  of 
securing  the  assent  of  the  required  percentage  of  stockholders 
of  the  subsidiary  companies.  In  this  instance,  however, 
the  attractive  offer  by  the  Consolidated  Company  at  the 
start  had  brought  into  its  treasury  almost  all  the  outstanding 
stock  of  both  the  American  and  the  Continental  companies. 
The  details  of  the  merger  were,  therefore,  easily  settled. 
This  change  of  form  and  name  of  the  combination  was 
simply  a  supposed  protection  against  legal  attack  and  was 
not  of  much  practical  importance. 

The  report  of  the  Commissioner  of  Corporations  states 
that  "the  total  number  of  formerly  separate  concerns  and 
combinations  which  have  passed  under  the  control  of  the 
Tobacco  Combination  is  in  the  neighborhood  of  250." 
This  includes,  not  only  manufacturers  of  tobacco  in  its 
various  forms,  but  also  makers  of  contributory  products, 
such  as  tin  foil,  cotton  bags,  wooden  boxes,  and  cigar  and 
cigarette  machinery,  as  well  as  distributors,  including  the 
United  Cigar  Stores  Company.  The  report  estimates  the 
combination's  percentage  of  the  national  output  in  1906 
as  follows: 


212  PROGRESS  OF  THE   EMPIRE   STATE 

Cigarettes,  52.5  per  cent.;  little  cigars,  81.3  per  cent.; 
cigars,  14.7  per  cent. ;  plug  and  twist,  81.8  per  cent. ;  smoking, 
70.6  per  cent.;  fine  cut,  80.9  per  cent.;  snuff,  96  per  cent. 
Apart  from  cigars  and  cigarettes,  the  combination's  per- 
centage of  the  total  output  of  manufactured  tobacco  in 
each  of  several  years,  according  to  the  report,  was:  1891, 
7.1  per  cent.;  1897,  20  per  cent.;  1900,  60.6  per  cent.;  and 
1906,  77.6  per  cent. 

On  May  29,  191 1,  the  United  States  Supreme  Court 
affirmed  with  slight  changes  a  decree  of  the  United  States 
Circuit  Court  dissolving  the  American  Tobacco  Company  as 
an  illegal  combination  under  Sections  I.  and  II.  of  the 
Sherman  Anti-Trust  Law.  The  plan  of  dissolution,  as  finally 
approved,  provided  that  the  combination  should  be  resolved 
into  its  constituent  elements,  leaving  separate  companies 
in  control  of  each  of  the  several  distinct  tobacco  trades — 
cigarette,  smoking  tobacco,  plug,  snuff,  and  cigars. 

The  process  of  dissolution  was  made  easier  by  reason  of 
the  orderly — we  might  almost  say  logical — growth  of  the 
combination.  Far-sightedness,  careful  long-distance  plan- 
ning, certainty  of  execution — these  are  striking  features  of 
the  Tobacco  Combination's  history.  Step  by  step  the 
organizers  proceeded,  first  to  establish  control  of  cigarette- 
making,  then  to  make  themselves  dominant  successively 
in,the  plug,  the  smoking  tobacco,  the  snuff,  and  the  cigar 
trades  in  the  United  States,  then  to  enter  foreign  markets. 
There  have  been  no  haphazard  moves. 

Any  fair-minded  man,  whatever  judgment  as  to  the  good 
or  evil  results  of  the  Tobacco  Combination  he  may  form,  will 
be  impressed,  as  he  studies  its  history,  with  the  ability  of  its 
management.  At  every  stage  its  operations,  though  often 
daring,  have  been  based  on  thorough  knowledge  and  sound 
thinking.  Time  after  time  it  has  met  and  defeated  strongly 
entrenched  competitors.     It  is  well  known  that,  through  an 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION   213 

efficient  system  of  gathering  information,  its  officers  have 
gone  far  in  reducing  the  uncertainties  of  the  business.  In 
the  financial  handling  there  is  evidence  of  the  same  fore- 
thought and  caution.  At  the  beginning,  the  American 
Tobacco  Company  announced  its  "consistent  policy  of 
not  borrowing  money."  Later,  when  its  earnings  became 
more  stable,  large  issues  of  bonds  were  put  out.  But 
throughout  its  history  it  has  steadily  maintained  an  ample 
working  capital  and  has  never  yielded  to  the  temptation  to 
develop  its  business  without  ample  cash  resources. 

Another  noteworthy  characteristic  of  the  Tobacco 
Combination  is  the  absence  of  one-man  control.  The  report 
of  the  Commissioner  of  Corporations  shows  that  ten  of  the 
largest  stockholders  in  1906  controlled  60  per  cent,  of  the 
voting  stock.  These  ten  stockholders  were  J.  B.  Duke,  A.  N. 
Brady,  O.  H.  Payne,  P.  A.  B.  Widener,  Thomas  F.  Ryan, 
B.  U.  Duke,  G.  B.  Schley,  the  firm  of  Moore  &  Schley 
(chiefly  as  agent  for  clients),  and  the  estates  of  W.  C.  Whit- 
ney and  W.  L.  Elkins.  In  the  Tobacco  Combination,  one 
should  not  overlook  the  counsel,  Mr.  Fuller.  He  could  not 
be  spared  any  more  than  Mr.  S.  C.  T.  Dodd  of  the  Standard 
Oil  Company  or  Mr.  Parsons  of  the  Sugar  Combination 
could  be  spared  from  the  history  of  those  concerns.  The 
lawyers  are  not  so  prominent  as  the  presidents.  It  has 
often  been  their  skill  that  has  opened  the  way  to  advance 
and  that  has  warded  off  attacks — just  and  unjust.  This 
group,  the  membership  of  which  has  varied  somewhat  from 
year  to  year,  has  from  1899  on  worked  almost  as  a  unit. 
But  no  one  or  two  or  three  members  of  the  group  have  been 
strong  enough  to  dominate  their  associates. 

The  American  Smelting  &  Refining  Co.  was  founded  under 
the  laws  of  New  Jersey,  April  4,  1899.  It  started  with  a 
controlling  interest  in  thirteen  large  concerns  engaged  in 
smelting  and  refining  lead  and  silver  ore,  and  was  said  to 


214  PROGRESS  OF  THE   EMPIRE   STATE 

have  sufficient  capacity  to  handle  all  the  smelting  ore 
mined  east  of  the  Rocky  Mountains.  In  1901  a  large  in- 
terest in  the  enterprise  was  acquired  by  the  house  of  M. 
Guggenheim's  Sons.  This  remarkable  family,  of  which 
Meyer  Guggenheim  was  the  head,  has  become  the  greatest 
mining  and  smelting  family  in  the  world.  The  family 
consisted  originally  of  seven  sons  and  three  daughters, 
all  of  whom  are  living  except  Benjamin,  who  was  lost  on 
the  Titanic,  April  15,  191 2.  Meyer  Guggenheim  enforced 
upon  his  seven  sons  the  maxim  that  "in  union  is  force." 
Following  his  advice,  the  action  of  the  family  councils  is 
determined  by  the  voice  of  a  majority,  and  no  important 
step  is  taken  without  the  concurrence  of  all.  It  has  also 
been  a  tradition  that  no  outsider  who  has  joined  the  family 
in  a  financial  venture  shall  suffer  loss.  This  was  exemplified 
in  a  striking  manner  in  1906,  when  the  firm  paid  up  #1,500,- 
000  losses  which  had  been  incurred  by  those  who  had  joined 
in  underwriting  the  Nipissing  Cobalt  Mines. 

After  the  Guggenheims  acquired  an  interest  in  the 
American  Smelting  &  Refining  Co.,  Daniel  Guggenheim 
became  president  and  chairman  of  the  board  of  directors. 
Three  other  members  of  the  family — Solomon  R.,  Isaac, 
and  Murray  Guggenheim — also  serve  on  the  board.  Other 
members  of  the  family  conduct  branches  of  the  business  in 
other  parts  of  the  country,  Simon  Guggenheim  having 
lived  for  a  time  in  Colorado  and  been  United  States  Senator 
from  that  State  for  the  term  1907  to  1913.  Direct  relations 
were  established  at  an  early  date  with  the  London  silver 
market,  and  an  effort  was  made  by  the  Guggenheims  to 
market  the  product  of  American  mines  on  terms  the  most 
equitable  and  profitable  to  American  miners.  Among 
those  who  have  contributed  materially  to  the  success  of 
the  company  is  Mr.  Edward  Brush  of  Greenwich,  Conn., 
who  rose  from  the  position  of  secretary  to  that  of  one  of 


a 


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■ff 


&^*^£x-£4~^+^_ 


DANIEL  GUGGENHEIM 

Was  born  in  Philadelphia,  July  9,  1856.  Entered  the  American 
Smelting  &  Refining  Co.  in  1901,  and  became  president  and 
chairman  of  the  board  of  directors.  He  is  president  and  director 
of  the  Guggenheim  Exploration  Co.,  American  Smelters'  Securi- 
ties Co.,  vice-president  and  director  of  the  Yukon  Gold  Co., 
director  of  the  National  Bank  of  Commerce,  Guaranty  Trust  Co., 
Utah  Copper  Co.,  Nevada  Northern  Railway  Co.,  and  other 
corporations.  Mr.  Guggenheim  married  on  July  22,  1884,  Miss 
Florence  Shloss,  and  has  two  sons  and  one  daughter.  He  is  an 
active  patron  of  art  and  some  years  ago  presented  Louis  Loeb's 
painting,  The  Temple  of  the  Winds,  to  the  Metropolitan  Museum 
of  Art. 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION  215 

the  vice-presidents,  became  one  of  the  chief  American  experts 
on  silver,  and  was  consulted  by  the  Government  of  Mexico 
in  the  plans  for  the  monetary  reform  in  that  country. 

The  capital  stock  of  the  American  Smelting  &  Refining 
Co.  stood  for  several  years  at  #100,000,000,  of  which  half 
was  common  and  half  preferred  stock.  The  amount  of 
common  stock  was  increased  by  $15,000,000  in  191 1,  the 
additional  amount  to  be  held  solely  for  the  conversion  of 
the  six  per  cent,  convertible  debentures  of  the  American 
Smelters'  Securities  Co.  The  company  has  plants  in 
Colorado,  Montana,  Nebraska,  Illinois,  Utah,  and  else- 
where in  the  United  States,  and  also  large  establishments 
in  Mexico. 

Certain  other  combinations  work  in  such  close  harmony 
with  the  American  Smelting  and  Refining  Company  that 
they  may  almost  be  considered  part  of  the  Smelting  Com- 
bination. Especially  is  this  true  of  the  National  Lead  and 
United  Lead  companies.  The  former  was  organized  in  1891 
as  successor  to  the  National  Lead  Trust.  It  owns  twenty- 
six  plants  for  the  manufacture  of  white  lead,  oxides,  oils, 
and  for  the  refining  and  smelting  of  lead.  Its  capital  stock 
is  $30,000,000,  half  preferred  and  half  common.  The 
United  Lead  Company,  organized  in  1903,  includes  most  of 
the  other  lead  plants  of  the  country.  Its  capital  stock  is 
$25,000,000  and  it  has  a  bond  issue  of  $10,000,000. 

The  Steel,  like  the  Oil,  Combination  is  too  well  known 
to  require  a  lengthy  discussion.  The  United  States  Steel 
Corporation  is  a  super-combination,  a  combination  of 
combinations.     The  eight  companies  first  included  were: 

Carnegie  Steel  Company 
Federal  Steel  Company 
American  Steel  and  Wire  Company 
National  Tube  Company 


216  PROGRESS  OF  THE   EMPIRE   STATE 

National  Steel  Company 
American  Tin  Plate  Company 
American  Steel  Hoop  Company 
American  Sheet  Steel  Company. 

Shortly  after  organization,  two  other  companies  were 
taken  in,  namely: 

American  Bridge  Company 

Lake  Superior  Consolidated  Iron  Mines  Company. 

Among  the  corporations  which  have  since  been  acquired 
are: 

Shelby  Tube  Company 

Union  Steel  Company 

Tennessee  Coal,  Iron,  and  Railroad  Company. 

The  number  of  corporations  directly  subsidiary  to  the 
parent  corporations  has  been  reduced  somewhat  by  con- 
solidating some  of  the  subsidiary  companies.  The  enter- 
prise is  so  vast  that  in  the  nature  of  things  the  officials  of 
the  holding  company  can  maintain  only  a  general  oversight 
over  the  sub-companies.  Each  subsidiary  company  man- 
ages its  own  internal  affairs,  and  buys  and  sells  from  and 
even  competes  with  other  sub-companies.  Cross  shipments, 
however,  are  avoided,  and  raw  materials  are  furnished  by 
common  agencies.  The  idea  is  to  stimulate  each  company, 
by  internal  competition  and  otherwise,  to  the  highest  pitch 
of  efficiency. 

The  formal  organization  of  the  company  is  less  interest- 
ing, however,  than  a  review  of  its  industrial  history  and 
position.  One  striking  fact  is  the  falling  off,  during  the  last 
ten  years,  in  its  percentage  of  the  total  steel  production  of 
the  United  States.     In  1901  this  percentage  was  66.2;  in 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION  217 

191 1,  54.3.  This  decline  may  be  due  in  part  to  the  fact  that 
in  191 1  the  Steel  Corporation  was  operating  only  about  72 
per  cent,  of  its  maximum  capacity,  and  the  independent 
steel  companies  were  operating  over  80  per  cent.  Yet  it 
cannot  be  doubted  that  the  independent  concerns  have 
grown  faster  than  the  combination. 

This  falling  off  does  not  have  so  important  a  bearing  on 
the  question  as  to  whether  the  Steel  Combination  exercises 
control  over  prices  or  not  as  it  is  sometimes  supposed  to  have. 
The  influence  of  the  Steel  Corporation  arises  chiefly  from 
the  immensity  of  its  ore  supplies,  and  the  economy  with 
which  they  may  be  mined.  It  is  estimated  that  it  controls 
about  two  billion  tons  of  possible  iron  ore  underground. 
The  Corporation  now  consumes  at  the  rate  of  about  twenty 
million  tons  a  year  and,  of  course,  works  those  mines  where 
the  cost  of  extracting  and  transportation  is  lowest.  This 
is  an  advantage  over  all  present  or  future  competitors  which 
apparently  places  the  Corporation,  apart  from  possible 
legal  interference,  in  an  impregnable  position. 

The  chief  event  in  the  financial  history  of  the  Steel 
Corporation  is  its  much  discussed  preferred  stock  conversion 
of  1902.  In  April  of  that  year,  the  management  issued  a 
circular  to  stockholders  proposing  a  plan  for  securing 
$50,000,000  new  capital  and  at  the  same  time  effecting  a 
reduction  in  the  combined  charges  for  interest  and  preferred 
dividends.  The  essential  point  of  the  plan  was  to  exchange 
7  per  cent,  preferred  stock  for  5  per  cent,  bonds  on  the 
following  basis:  Each  preferred  stockholder  was  to  be 
permitted  to  subscribe,  up  to  an  amount  equal  to  one  half 
his  preferred  stock  holdings,  to  a  new  issue  of  $250,000,000 
5  per  cent,  sinking  fund  bonds,  and  to  pay  for  his  bonds 
either  80  per  cent,  in  preferred  stock  and  20  per  cent,  in 
cash,  or  100  per  cent,  in  preferred  stock  at  his  option. 

It   was   expected    in    this   way   to    retire    $200,000,000 


218  PROGRESS   OF  THE    EMPIRE    STATE 

preferred  stock  and  substitute  #250,000,000  in  bonds.  A 
feature  of  the  plan  to  which  considerable  objection  was 
raised  was  the  underwriting  of  the  new  issue  by  a  syndicate 
which  included  some  of  the  corporation's  directors.  The  syn- 
dicate obligated  itself  to  insure  a  total  sale  of  #100,000,000 
of  the  bonds,  in  return  for  which  it  was  to  have  the 
privilege  of  subscribing  to  any  of  the  bonds  not  taken  by 
stockholders  and  to  receive  a  4  per  cent,  commission  on  all 
the  bonds  disposed  of.  It  was  objected  that  the  directors 
should  not  participate  in  such  a  syndicate  and  that  the 
commission  was  excessive. 

To  the  first  objection,  a  satisfactory  answer  was  made  by 
pointing  out  that  most  of  the  large  financial  houses,  which 
would  be  capable  of  undertaking  so  large  an  underwriting, 
were  more  or  less  directly  represented  in  the  directorate  of 
the  United  States  Steel  Corporation.  Opinions  as  to  the 
propriety  of  the  commission  charge  differ.  It  is  undeniable 
that  the  operation  was  risky  and  called  for  special  skill  and 
capital.  The  percentage  agreed  upon  is  not  unusual  for 
similar  transactions.  On  the  whole,  there  seems  to  be  no 
adequate  reason  for  casting  doubt  on  the  good  faith  of  the 
Corporation's  directors.  The  whole  transaction,  though 
much  criticized  at  the  time,  may  fairly  be  said  to  have  been 
justified  by  the  subsequent  financial  record  of  the  Steel 
Corporation.  The  earnings  have  been  amply  sufficient  to 
take  care  both  of  the  increased  interest  charges  and  of  the 
preferred  dividend. 

The  enormous  capitalization  of  the  United  States  Steel 
Corporation  is  made  up  approximately  as  follows: 

Bonded  debt #600,000,000 

Preferred  stock 360,000,000 

Common  stock 508,000,000 

Total #1,468,000,000 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION    219 

The  common  question  as  to  how  much  of  this  capitaliza- 
tion is  "water"  may  be  variously  answered,  depending  on 
the  test  of  over-capitalization  which  is  applied.  There 
can  be  no  doubt  that  the  subsidiary  combinations,  which 
were  taken  into  the  United  States  Steel  Corporation,  were 
capitalized  to  a  nominal  value  far  in  excess  of  the  cost 
of  their  tangible  assets.  The  United  States  Steel  Corpora- 
tion, in  turn,  issued  approximately  #540,000,000  of  stock  at 
its  formation  over  and  above  the  par  value  of  the  stock  of 
subsidiary  companies  which  it  received  in  exchange.  In 
applying  the  test  of  money  value  invested,  therefore,  there 
can  be  no  question  but  that  the  United  States  Steel  Corpora- 
tion was  over-capitalized.  It  is  possible,  however,  that  the 
value  of  the  Corporation's  assets  may  have  increased  since 
they  were  first  acquired  by  the  subsidiary  companies  to  such 
an  extent  as  to  create  a  firm  foundation  for  the  combina- 
tion's capitalization.  That  they  have  increased  greatly  is 
certain.  Charles  M.  Schwab,  the  first  president,  is  authority 
for  the  valuation  of  the  unmined  iron  ore  of  the  Steel  Cor- 
poration at  #700,000,000.  If  this  valuation  is  correct,  the 
present  money  value  of  the  corporation's  assets  is  not  far 
removed  from  its  nominal  capitalization.  The  third  test 
is  the  earning  power  of  the  corporation.  Approximate 
net  earnings  since  incorporation  have  been: 


Net  Earnings 

1902 $133,000,000 

1903 109,000,000 

1904 73,000,000 

1905 120,000,000 

1906 157,000,000 

1907 161,000,000 


220  PROGRESS  OF  THE   EMPIRE   STATE 

1908 $  91,000,000 

1909 13 1,000,000 

1910 141,000,000 

191 1 104,000,000 

These  financial  results  have  been  even  more  favorable 
than  was  anticipated  by  independent  judges  at  the  start. 
Assuming  that  it  would  be  fair  to  capitalize  these  earnings 
on  a  10  per  cent,  basis,  we  get  a  result  approximately  equal 
to  the  total  nominal  capitalization.  There  has  been  general 
recognition  of  the  far-sightedness,  energy,  and  wisdom  of 
the  corporation's  management.  The  directorate  includes 
some  of  the  ablest  financial  and  industrial  leaders  of  the 
country.  The  successive  presidents  of  the  corporation — 
Mr.  Charles  M.  Schwab,  Mr.  William  E.  Corey,  and  Mr. 
James  A.  Farrell — have  shown  marked  ability.  The 
active  head  of  the  Steel  Company,  Judge  Elbert  H.  Gary, 
holds  a  commanding  position  among  the  steel  men  of  the 
world;  he  is  conspicuous  among  industrial  leaders  for  his 
moderation  and  breadth  of  view.  When  formerly  president 
of  the  Federal  Steel  Company,  he  had  shown  marked  ability 
and  judgment  in  directing  the  affairs  of  one  of  the  great 
"integrating"  combinations.  Moreover,  even  then,  before 
the  organization  of  the  Steel  Corporation,  he  had  outlined 
in  his  testimony  before  the  United  States  Industrial  Com- 
mission the  wise  policies  of  publicity,  responsibility  to 
government  and  law,  moderate,  steady  prices,  considera- 
tion for  public  opinion  that  he  has  since  exemplified  in  the 
direction  of  the  affairs  of  the  Steel  Corporation. 

Although  in  speaking  of  the  Steel  Corporation  to-day  the 
names  of  Andrew  Carnegie  and  J.  Pierpont  Morgan  are  often 
not  mentioned,  it  is  not  too  much  to  say  that  they  were 
— one  indirectly,  the  other  directly— its  creators,  and  that 
its  present  success  is  largely  due  to  them.      Carnegie  had 


stsC^G 


SOLOMON  R.  GUGGENHEIM 

Was  horn  in  Philadelphia,  February  2,  1861,  fourth  of  the 
seven  sons  of  Meyer  Guggenheim.  First  studied  mining  and 
smelting  in  Colorado.  He  afterwards  went  to  Mexico,  where  he 
superintended  the  building  of  the  first  smelter  in  that  country  at 
Monterey;  visited  Alaska,  and  assisted  in  forming  the  Guggen- 
heim Exploration  Co.  Mr.  Guggenheim  is  chairman  of  the 
executive  committee  of  the  American  Smelting  &  Refining  Co., 
president  of  the  Yukon  Gold  Co.,  director  of  the  American  Smelt- 
ers' Securities  Co.,  the  Guggenheim  Exploration  Co.,  the  Utah 
Copper  Co.,  the  Interborough-Metropolitan  Co.,  and  other 
corporations. 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION   221 

long  been  known  as  America's  greatest  ironmaster.  The 
Carnegie  Company  was  the  largest  of  the  companies  that 
helped  form  the  Steel  Corporation.  Though  Carnegie 
himself  decided  to  sell  his  interests — at  a  very  good  price, 
naturally — and  retire  from  active  business,  it  is  after  all 
largely  his  principles  and  methods  that  have  been  followed 
in  the  conduct  of  the  plants.  The  three  presidents  are  all 
his  "boys,"  whose  ability  he  discovered  and  whom  he 
trained.  His  system  of  bounties  to  managing  heads  had 
produced  enormous  salaries — over  a  million  dollars  a  year 
in  one  case  at  least — but  it  had  produced  also  unrivaled 
masters  for  profit-making.  And  the  Steel  Corporation  has 
had  the  benefit.  It  must  be  said,  on  the  other  hand,  that 
the  same  system  is  likely  to  prove  hard  on  the  lower  grade 
laborers,  and  it  is  a  matter  of  question  how  far  the  condition 
of  long  hours  and  seven-day  weeks  found  a  year  ago  at 
Bethlehem  and  elsewhere  in  the  steel  industry — now  gen- 
erally remedied  on  the  initiative  of  the  Steel  Corporation — 
is  due  to  that  system  and  to  the  other  factors  accompany- 
ing it.  However  that  may  be,  Mr.  Carnegie's  influence  is 
still  felt,  though  indirectly,  in  the  steel  industry,  and  will 
long  remain. 

Again,  no  other  banker  than  Mr.  Morgan  had  the  skill 
and  the  power  and  prestige  necessary  to  finance  so  huge  a 
combination  as  to  give  to  it  and  to  maintain  for  it  the  public 
confidence  needed  to  insure  success.  Mr.  Morgan  was  always 
a  constructive  financier — not  a  wrecker.  When  he  under- 
took an  organization,  the  people  expected — and  he  had  given 
them  reason  to  expect — fair  treatment  and  success,  and  es- 
pecially this  is  what  counts  in  the  market.  This  confidence 
was  needed  in  the  Steel  Corporation.  The  event  has 
proved  that  it  was  justified.  As  examples  of  the  Corpora- 
tion's policy,  we  may  cite  especially  the  profit-sharing  plan, 
for  which  Mr.  George  W.   Perkins  is  largely  responsible, 


222  PROGRESS  OF   THE    EMPIRE   STATE 

under  which  twenty-five  thousand  employees  have  become 
stockholders;  the  practice  of  giving  ready  publicity  to  all 
important  developments  and  to  financial  statements;  and 
the  willingness  of  the  directorate  to  recognize  and  defer  to 
the  force  of  public  opinion.  The  United  States  Steel  Cor- 
poration through  this  policy  has  gradually  overcome  much 
of  the  suspicion  and  active  hostility  which  its  very  magnitude 
at  first  aroused. 

It  is  impossible  here  to  do  more  than  touch  on  the  striking 
characteristics  of  a  few  of  the  corporations  listed  among  the 
lesser  combinations.  The  Union  Typewriter,  which  controls 
five  companies  manufacturing  standard  machines,  has 
important  interests  in  New  York  State.  This  is  a  typical 
specialty  combination,  organized  as  a  result  of  severe 
competition.  The  combination  is  estimated  by  Mr.  John 
Moody  to  control  about  75  per  cent,  of  the  American  output 
of  typewriting  machines,  but  is  by  no  means  free  from 
vigorous  competition.  It  is  understood  to  act  more  or  less 
in  harmony  with  its  leading  competitors,  at  any  rate  in 
maintaining  prices.  The  corporation  has  not  yet  achieved 
financial  stability,  for  its  earnings  fluctuate  violently,  but 
it  is  said  to  be  progressive  and  well-managed. 

The  Malting  Combination  has  had  a  checkered  financial 
history.  The  American  Malting  Company  was  incorporated 
in  New  Jersey  in  1897  and  issued  $12,500,000  preferred  stock 
and  $13,747,000  common  stock  in  exchange  for  twenty- two 
malting  plants,  several  located  in  New  York  State,  and  cash 
working  capital  of  $2,080,000.  In  the  two  years  following, 
several  additional  plants  were  purchased.  The  prospectus 
of  the  company  was  so  drawn  as  to  lead  investors  to  expect 
that  earnings  would  easily  take  care  of  the  7  per  cent,  divi- 
dend on  preferred  stock,  and  of  an  equal  dividend  on 
common  stock.  The  full  dividend  on  the  preferred  was 
paid  for  two  years. 


THE  DEVELOPMENT  OF  INDUSTRIAL  COMBINATION   223 

Toward  the  end  of  1899,  however,  it  was  discovered  that 
the  company  was  short  of  cash,  and  the  directors  proposed 
that  a  bond  issue  be  put  out.  As  the  result  of  protest  from 
the  stockholders,  a  special  committee  was  appointed  to 
examine  the  company's  affairs.  The  committee  reported, 
among  other  things,  that  within  two  years  after  its  organiza- 
tion the  company  had  accumulated  a  floating  debt  of  nearly 
three  million  dollars;  that  dividends  paid  had  not  been 
earned ;  and  that  the  company  in  general  was  badly  managed. 
The  result  of  this  investigation  was  a  partial  change  in 
management  and  the  sale  of  four  million  dollars  of  fifteen- 
year  bonds  to  provide  additional  cash.  A  movement  for 
reorganization,  designed  to  reduce  the  capitalization  and  to 
take  care  of  the  accumulated  unpaid  dividends  of  the  pre- 
ferred stock,  was  inaugurated.  Not  until  1906,  however, 
was  an  acceptable  plan  of  reorganization  adopted  and  put 
into  effect.  Under  this  plan  the  American  Malt  Corpora- 
tion was  organized  with  a  capital  stock  of  $6,000,000 
common  and  $9,000,000  cumulative  preferred.  The  pre- 
ferred stock  of  the  American  Malting  Company  was  ex- 
changed for  the  preferred  stock  of  the  American  Malt 
Corporation  at  the  rate  of  $62  of  new  stock  for  each  one 
hundred  dollars  of  old  stock,  and  the  old  common  was 
exchanged  for  new  common  at  the  rate  of  #44  of  new  stock 
for  $100  of  old  stock.  This  plan  was  accepted  by  practically 
all  of  the  old  stockholders. 

Combinations  among  trading  enterprises  are  much  less 
frequent  than  among  manufacturing  companies.  An  in- 
teresting example  of  mercantile  combination  is  the  United 
Drygoods  Companies.  This  corporation  was  formed  in 
1909,  but  the  combination  really  dates  from  1901,  when  the 
Associated  Merchants  Company  acquired  a  controlling 
interest  in  several  large  department  stores.  This  company 
in  turn  was  successor  to  a  still  earlier  alliance  of  wholesale 


224  PROGRESS  OF  THE   EMPIRE   STATE 

and  retail  drygoods  interests  under  the  lead  of  the  H.  B. 
Claflin  Company.  The  combination  is  another  expression 
of  a  general  tendency  on  the  part  of  wholesale  houses  to 
enter  the  retail  field.  By  so  doing,  they  entrench  themselves 
against  competition  and  establish  their  own  outlets  for  the 
goods  which  they  handle.  From  the  other  side  appears 
a  similar  tendency;  that  is,  the  great  retail  stores  which 
buy  in  large  quantities  often  find  it  profitable  to  enter  the 
wholesale  field,  thus  coming  into  direct  competition  with 
the  wholesale  houses  and  shutting  off  some  of  their  chief 
markets.  Since  1901,  Mr.  John  Claflin,  through  the 
companies  which  he  controls,  has  purchased  and  developed 
retail  stores.  Under  his  guidance  this  policy  has  proved 
profitable.  The  United  Drygoods  Companies  has  more  than 
fulfilled  the  predictions  of  its  organizers. 

The  experience  with  industrial  combinations  in  New 
York  State  has  not  been  essentially  different  from  the  experi- 
ence of  other  States  and  of  foreign  countries.  Here,  as 
elsewhere,  two  extreme  parties  have  been  conspicuous — 
one  advocating  the  destruction,  or  at  least  the  severest 
regulation,  of  trusts,  the  other  demanding  further  protection 
for  trust  property  and  privileges.  Both  these  parties, 
fortunately,  are  losing  their  holds  on  public  attention.  The 
moderates,  believers  in  business  progress  and  development 
and  in  combination  under  sane  governmental  supervision 
and  in  the  light  of  full  publicity,  are  making  themselves 
felt.  The  difficult  problem  is  that  of  keeping  industrial 
combinations  within  the  bounds  of  honesty  and  of  respect 
for  other  people's  rights,  without  at  the  same  time  inter- 
fering with  industrial  efficiency.  In  the  world-wide  strug- 
gle for  markets,  the  American  manufacturer  and  trader, 
our  people  recognize,  must  not  be  seriously  handicapped. 
On  the  other  hand,  he  must  not  be  left  entirely  free 
to  oppress  or  attack  his  neighbors  as  he  sees  fit.     There 


THE   DEVELOPMENT  OF  INDUSTRIAL  COMBINATION   225 

seems  to  be  no  good  reason  why  the  ideal  of  intelligent 
regulation  without  unnecessary  interference  should  not  be 
reached. 

The  effects  of  industrial  combinations  on  prices  and 
wages  have  not  proved  so  harmful  as  was  generally  antici- 
pated ten  or  fifteen  years  ago.  In  a  few  instances  new- 
formed  combinations  have  attempted  to  justify  their 
existence  by  arbitrary  increases  of  prices.  This  policy, 
notably  in  the  case  of  the  Whiskey  Trust,  awakened  so 
much  hostility  and  so  obviously  invited  fresh  competi- 
tion that  its  unwisdom  is  now  apparent  to  every  one.  Most 
of  the  combinations  have  contented  themselves  with  en- 
deavoring to  effect  economies  in  production  and,  at  the 
same  time,  maintain  good  prices.  When  this  policy  is 
combined  with  fearless  publicity,  the  normal  result  is  to 
disarm  hostile  criticism.  The  record  of  the  American 
combinations,  on  the  whole,  in  spite  of  special  exceptions, 
in  avoiding  and  settling  disputes  with  labor  organizations 
is  remarkable.  Nor  has  industrial  peace  been  secured  at  the 
laborer's  expense.  On  the  contrary,  wages  have  been 
adjusted  from  time  to  time  by  voluntary  agreement  between 
the  two  parties.  It  has  been  often  shown  that  organized 
labor,  on  the  one  side,  and  organized  capital,  on  the  other 
side,  when  both  are  headed  by  reasonable  and  far-sighted 
men,  can  agree. 

Industrial  combinations  are  not  entitled,  by  any  means, 
to  unstinted  praise.  Many  of  them  have  been  selfishly 
and  foolishly  conceived  and  managed.  There  have  been 
many  instances  of  oppression  and  unfair  measures  in  com- 
petition, though  no  more  than  among  smaller  rivals.  The 
tendency  is  for  the  survival  and  growth  only  of  those  com- 
binations which  possess  "a  decent  regard  for  the  opinions 
of  mankind,"  and  a  sense  of  moderation  which  governs 

their  dealings  with  their  business  associates,  their  employees, 

15 


226  PROGRESS  OF  THE   EMPIRE  STATE 

and  the  public.  On  the  credit  side  of  our  account  with 
almost  all  industrial  combinations  must  be  placed  their 
influence  in  raising  the  standards  of  industrial  and  commer- 
cial efficiency.  The  natural  tendency  has  been  to  bring  to 
the  leadership  of  the  combinations  the  best  equipped  and 
most  progressive  men.  These  men  have  taken  the  lead  in 
the  movement  toward  better  organization  of  business  and 
better  training  for  executive  positions.  Perhaps  the  best 
thing  that  can  be  said  of  industrial  combinations,  both  in 
New  York  State  and  elsewhere,  is  that  though  they  make 
it  hard  for  the  small  man  to  succeed  independently,  they 
offer  a  great  opportunity  to  men  of  first-rate  ability  and 
training. 


GEORGE  BRUCE  CORTELYOU 

Ex-Secretary  of  the  Treasury;  born  New  York  City,  July  26, 
1862;  son  Peter  C,  Jr.,  and  Rose  (Scary)  Cortelyou;  graduated 
Hempstead  (L.  I.),  Institute,  1879;  State  Normal  School,  West- 
field,  Mass.,  1882;  LL.B.,  Georgetown  University,  1895;  LL.M., 
Columbian  (now  George  Washington)  University,  1890;  LL.D., 
Georgetown,  1903;  Ky.  Wesleyan,  1905;  University  of  Illinois, 
1905.  Married  Lily  Morris,  daughter  Dr.  Hinds,  president 
Hempstead  (N.  Y.)  Institute,  September  15,  1888.  General 
law  and  verbatim  reporter,  New  York,  1883-85;  principal  of 
preparatory  schools,  New  York,  1885-89.  Entered  public  service, 
1889,  and  was  private  secretary  to  various  officials,  including 
post-office  inspector  at  New  York,  Surveyor  of  the  Port  of  New 
York,  and  fourth  assistant  postmaster-general.  Was  made 
stenographer  to  the  President,  November,  1895;  executive  clerk, 
February,  1896;  assistant  secretary  to  President  McKinley, 
July  1,  1898;  private  secretary,  April  13,  1900;  reappointed  by 
President  Roosevelt,  September  16,  1901.  Was  Secretary  of 
Commerce  and  Labor,  February  16,  1903,  to  June  22,  1904; 
Postmaster-General,  March  7,  1905,  to  March  4,  1907;  and 
Secretary  of  the  Treasury,  March  4,  1907,  to  March  8,  1909,  in 
cabinets  of  President  Roosevelt;  was  chairman  Republican 
National  Committee,  1904-07;  president  Consolidated  Gas  Co.  of 
New  York,  since  March  9,  1909,  and  director  of  leading  corpora- 
tions. 


CHAPTER  VII 

THE  CRISIS  OF  1907 

BY  GEORGE  B.   CORTELYOU. 

THE  better  perspective  afforded  by  the  lapse  of  several 
years  has  resulted  in  the  causes  of  the  panic  of 
1907  being  very  generally  understood.  Economists 
differ  to  a  certain  extent  on  the  relative  importance  to  be 
attributed  to  the  four  great  underlying  influences  which 
combined  to  bring  on  the  trouble;  but  on  the  question  of 
what  these  influences  were,  there  is  pretty  general  agreement. 
In  the  first  place,  there  was  the  conversion  of  capital 
into  fixed  forms  which  took  place  on  a  tremendous  scale 
in  the  period  between  the  closing  of  the  last  century 
and  the  crisis  of  1907.  In  the  second  place,  there  was  the 
speculation  which  naturally  attended  the  immense  capital 
creations  of  that  time — a  speculation  which  was  not  confined 
to  the  United  States  but  spread  over  the  entire  world. 
In  the  third  place,  there  was  the  great  expansion  of  bank 
credit  by  which  this  speculative  movement  was  naturally 
attended,  and  which,  by  the  beginning  of  1907,  had  gone 
beyond  all  reason.  The  fourth,  and  last,  of  all  the  causes 
was  the  absorption  of  something  like  three  billion  dollars 
of  capital  as  a  result  of  three  costly  wars. 

"In  preparing  this  chapter,  I  have  availed  myself  freely,  with  the  consent  of  the 
publishers,  of  the  chapter  on  the  same  subject  in  Mr.  Charles  A.  Conant's  History 
of  Modem  Banks  of  Issue,  fourth  edition,  G.  P.  Putnam's  Sons,  1909;  and  of  my 
own  official  reply  to  Senate  Resolutions  of  December  12,  1907,  Senate  Document 
208,  Sixtieth  Congress,  1st  Session. — The  Author. 

227 


228  PROGRESS  OF  THE   EMPIRE   STATE 

How  great  was  the  conversion  of  capital  from  floating 
into  fixed  forms  is  well  remembered  by  those  who  went 
through  the  period.  At  the  end  of  the  nineteenth  century, 
it  will  be  recalled,  the  United  States  was  emerging  from  a 
period  of  business  depression.  Its  closing  years  saw  the 
trust-movement  well  under  way,  but  it  was  only  at  the 
very  end  of  the  century  that  the  really  big  movement  toward 
issuing  new  securities  got  fairly  started.  From  1898  on, 
the  formation  of  one  big  company  after  another  took  place, 
many  of  them  having  a  capitalization  unheard  of  only  a 
few  years  before.  In  rapid  succession,  one  industry  after 
another  went  through  the  process  of  combination,  a  great 
volume  of  bonds  and  preferred  shares  representing  actual 
value  being  supplemented  by  a  volume  of  common  stock 
representing  little  more  than  anticipated  earning  power 
and  good  will. 

By  no  means  was  this  movement  toward  the  corporate 
form  of  doing  business,  and  the  combination  of  enterprises 
already  conducted  in  that  form,  confined  to  the  United 
States.  In  England,  Germany,  and  France,  the  same 
tendency  was  strongly  marked  and  while,  perhaps,  there  is 
no  parallel  anywhere  for  our  own  record  of  a  billion  dollars' 
worth  of  new  securities  created  yearly  for  several  years  in 
succession,  the  aggregate  of  the  new  bonds  and  stocks  put 
out  was  extremely  large.  How  large  can  be  seen  from  the 
following  table,  based  upon  figures  taken  from  the  Moniteur 
des  Interets  Materiels,  showing  total  issues  of  all  classes  of 
securities: 

Issues  of  New  Securities,  1896-1906 

Net  new  demands 
Year  Total  i  Conversions  for  capital 

I896 $3,227,359,071        $1,465,451,600       $1,761,907,451 

1897 1,852,173,846       132,182,873     1,719,991,013 

I898 2,034,766,348       316,530,453     1,718,235,895 


THE  CRISIS  OF  1907  229 

Net  new  demands 

Total  issues                            Conversions  for  capital 

I899 #2,175,823,434     #120,873,970  #2,054,949,464 

I900 2,289,642,963        2,289,642,953 

I90I 1,917,916,282       1,917,916,282 

I902 3*597,489,052     1,639,921,000  I,957,568,052 

I903 3,534,248,906     1,687,729,387  1,846,519,519 

1904 2,785,138,525       353,445,223  2,431,693,302 

I905 3,688,124,622       323,487,879  3,364,636,743 

I906 5,126,000,000     2,001,000,000  3,125,000,000 


These  figures  show  that,  while  new  demands  for  capital 
were    comparatively    uniform    from    1896    down    to    1903, 
they  increased  greatly  during  the  next  three  years.     Hence 
came  the   strain  which  was  felt  in  the  market  for  capital 
in  Great  Britain  and  Germany  as  well  as  in  America.     In 
the  United   States,  issues  of  the   negotiable  securities  of 
corporations — stocks    and    bonds — multiplied    much    more 
rapidly  than  the  total  mass  of  tangible  physical  property, 
whose  value  was  computed   in   1904  at  #107,104,211,917. 
This   increase   in   security   issues   gave   an   appearance   of 
fluidity  to  the  capital  of  the  country,  which  was  in  some 
respects  deceptive.     While  securities  are  themselves  readily 
negotiable  under  normal  conditions,  they  represent  fixed 
capital  and  not  circulating  capital.     Stocks  constitute  the 
titles  to  shares  in  permanent  investments,  like  railways, 
factories,    and    buildings.     Bonds    usually    represent    the 
obligations  which  have  been  issued  to  acquire  fixed  capital 
and  are  secured  by  mortgages  upon  railway  mileage,  fac- 
tories, and  buildings.     The  conversion  of  circulating  capital 
into  these  fixed  forms  proceeded  at  a  remarkable  rate  after 
the   recovery   from    industrial   depression   about   the   year 
1900.     Careful   calculations  show  the   principal    securities 
outstanding  in  the  United   States  even   in    1905   to    have 


230  PROGRESS  OF  THE   EMPIRE   STATE 

been  about  #35,000,000,000  par  value.     Among  the  chief 
items  were  the  following: 

Par  Value  of  Outstanding  Securities  in  the  United 

States,  1905 

Class  of  Securities  Par  Value 

Government  debt $  3,265,000,000 

Steam  railways 12,600,000,000 

Street  railways 3,200,000,000 

National  banks 800,000,000 

Other  banks 650,000,000 

Manufactures 6,800,000,000 

Mining,  oil,  etc 3,300,000,000 

Other  classes 4,385,000,000 

Total $35,000,000,000 

Theamount  of  securitiesoutstandingthroughout  theworld 
as  early  as  1900  was  estimated  at  about  $110,000,000,000, 
or  more  than  the  entire  wealth  of  the  United  States.  Great 
Britain  was  credited  with  $26,400,000,000,  or  $616.97 
per  capita;  France  with  $19,500,000,000,  or  $500.95  per 
capita;  and  Germany  with  $10,000,000,000,  or  $177.41 
per  capita.  To  these  amounts  important  additions  were 
made  during  the  following  seven  years.  In  Great  Britain 
alone,  issues  of  new  capital  were  estimated  for  the  five  years 
ending  with  1904  at  $3,454,978,975,  but  this  included  a 
considerable  amount  in  foreign  securities  offered  on  the 
London  market.  In  the  United  States,  calls  for  new  com- 
pany capital  were  computed  for  1904  at  $1,003,542,200; 
for  1905,  $1,694,187,211;  for  1906,  $2,307,970,000;  and  for 
1907,  $1,459,325,000.  Into  Russia  was  poured  in  a  few 
years  French  capital  to  the  amount  of  at  least  $200,000,000. 

Coincident  with  these  issues  of  new  securities  occurred 


THE  CRISIS  OF  1907  231 

a  speculative  movement  of  great  breadth  and  magnitude. 
Naturally,  during  the  flotation  of  the  securities  of  the  new 
combinations,  earning  prospects  were  fully  exploited  and  the 
public  was  imbued  to  the  greatest  extent  possible  with 
the  idea  that  large  profits  were  to  be  realized  as  a  result  of 
more  concentrated  and  economical  management.  Launched 
one  after  another,  these  combinations  added  fuel  to  the 
speculative  flame,  so  that  before  the  movement  had  been 
in  progress  for  more  than  two  or  three  years  the  speculative 
tendencies  of  the  public  were  thoroughly  aroused  and  people 
who  never  before  had  had  the  slightest  interest  in  securities 
were  freely  buying  these  new  shares  and  bonds.  A 
glance  at  the  record  of  transactions  on  the  New  York 
Stock  Exchange  during  the  opening  years  of  the  present 
century  in  comparison  with  transactions  just  before  the 
panic  shows  clearly  to  what  extent  general  public  interest 
in  the  market  had  increased. 

The  speculative  field  was  widened  in  the  United  States 
by  the  conversion  of  private  manufacturing  enterprises 
into  stock-companies  and  the  grouping  of  these  companies 
by  consolidation  into  dominating  factors  in  their  special 
industries.  Large  issues  of  securities  for  "good  will" 
became  necessary  in  order  to  acquire  properties  which 
might  otherwise  prove  dangerous  competitors,  and  the 
securities  thus  issued  became  the  subject  of  active  specula- 
tion on  the  ^stock  exchanges.  Already  as  early  as  1900, 
the  number  of  industrial  companies  classified  by  the  Census 
as  "combinations"  was  183,  with  capital  actually  issued 
to  the  amount  of  #3,085,200,868.  By  the  year  1904,  the 
amount  of  capital,  including  bonds,  of  305  "industrial 
trusts,"  was  estimated  at  #6,717,791,533. 

It  was  inevitable  that  the  conspicuous  creation  of  such 
a  mass  of  new  securities  should  draw  into  the  maelstrom  of 
speculation  a  new  public  which  had  not  been  there  before, 


232  PROGRESS  OF  THE   EMPIRE   STATE 

that  prices  of  securities  should  be  forced  by  extravagant 
expectations  to  heights  not  warranted  by  real  value,  and 
that  the  market  should  react  violently  under  every  sudden 
gust  of  adverse  influence.  Such  a  reaction,  of  extreme 
violence,  took  place  on  the  9th  of  May,  1901,  due  to  a 
struggle  for  control  of  the  Northern  Pacific  Railway  between 
rival  interests,  which  led  to  a  rapid  advance  in  the  stock 
and  large  "short"  sales.  But  it  was  a  storm  which  soon 
passed.  The  buyers  of  the  cornered  stock  accepted  a 
moderate  settlement  by  the  "shorts,"  prices  of  securities 
promptly  recovered,  and  the  day  after  the  panic  money 
was  loaned  as  low  as  three  per  cent. 

Speculation  raged  vigorously  through  the  year  1902 
but  received  a  serious  check  in  1903.  Prices  of  securities, 
both  railway  and  industrial,  had  reached  a  height  which 
repelled  the  public  and  imposed  caution  upon  the  banks. 
In  February,  1903,  began  the  decline  in  the  price  of  pig 
iron,  which  was  not  checked  until  from  $24.25  per  ton, 
it  had  fallen  by  successive  stages  to  $15.50  in  November. 
Inevitably,  the  profits  of  the  Steel  Corporation  declined, 
the  price  of  its  common  stock  fell  from  397/8  to  10,  and 
that  of  the  preferred  shares  from  89^4  to  49^,  and  in  the 
autumn  it  became  necessary  to  suspend  the  dividend  on 
the  common  stock.  Other  industrial  shares  suffered  in 
like  proportion,  and  at  times  during  the  summer  of  1903 
grave  results  were  feared  for  the  entire  market.  The  fall 
in  quotations  for  iron  was  due  in  large  measure  to  the 
restriction  of  orders  by  the  railways,  which  were  influenced 
primarily  not  by  the  decline  of  business,  but  by  the  scarcity 
of  capital.  When  it  was  found  that  bonds  issued  at  low 
rates  for  long  terms  of  years  could  not  be  sold  to  advantage, 
recourse  was  had  in  many  cases  to  notes,  running  for  only 
two  or  three  years,  and  paying,  over  these  short  periods, 
a  much  higher  rate  of  interest  than  bonds.     A  large  volume 


AUGUSTUS  D.  JUILLIARD 

Merchant  and  capitalist;  senior  member  of  A.  D.  Juilliard  & 
Co.  Director  Chemical  National  Bank,  National  Bank  of 
Commerce,  The  Bank  of  America;  trustee  Mutual  Life  Insurance 
Co.,  New  York  Life  Insurance  &  Trust  Co.,  Title  Guarantee  & 
Trust  Co.,  Central  Trust  Co.,  Guaranty  Trust  Co.  of  New  York; 
director  Atchison,  Topeka  &  Sante  F6  Railroad,  North  British 
&  Mercantile  Insurance  Co.  of  New  York,  and  Realty  Associates. 
President  of  the  Metropolitan  Opera  &  Real  Estate  Co.;  governor 
New  York  Hospital;  trustee  American  Museum  of  Natural 
History;  member  Chamber  of  Commerce  since  1875;  member  of 
leading  clubs  and  prominent  in  charitable  and  civic  work. 


THE  CRISIS  OF  1907  233 

of  new  securities,  however,  was  still  undistributed  in  the 
hands  of  rich  men  and  powerful  syndicates,  and  their  heavy 
losses  led  to  the  designation  of  the  long  period  of  liquidation 
as  "the  rich  man's  panic."  By  skillful  support  of  the 
market,  so  that  the  decline  in  prices  was  spread  over  several 
months,  the  worst  consequences  of  the  crisis  were  averted. 
The  industrial  depression  proved  only  temporary,  and  by 
the  summer  of  1904  speculation  for  the  rise  was  resumed, 
and  continued,  with  varying  fortunes,  until  the  latter  part 
of  1905. 

The  year  1906  saw  the  culmination  of  this  great  specula- 
tive movement.  It  was  the  time  when  most  unexpectedly 
the  dividend  on  Union  Pacific  was  raised  from  six  to  ten 
per  cent,  and  an  initial  dividend  of  five  per  cent,  was  de- 
clared on  Southern  Pacific.  These  circumstances  were 
taken  full  advantage  of,  and  the  speculative  fever  was 
fanned  into  as  hot  a  flame  as  possible.  Rumors  of  coming 
deals  and  of  the  cutting  of  all  sorts  of  "melons"  were 
freely  circulated,  and  everything  was  done  to  induce  the 
public  to  go  into  the  market  and  take  part  of  the  load  from 
the  shoulders  of  those  who  were  carrying  stocks  at  the  then 
exceedingly  high  prices. 

In  the  midst  of  the  campaign  for  the  rise  the  supply  of 
funds  ran  low  and  recourse  was  had  to  borrowing  in  the 
foreign  market.  There  is  a  great  deal  of  exaggeration, 
without  doubt,  as  to  the  extent  to  which  the  market  was 
financed  with  foreign  money,  but  there  is  no  doubt  that 
the  accommodation  secured  in  London  and  Paris  ran  into 
hundreds  of  millions.  Even  with  the  accession  of  this  fresh 
supply  of  ammunition,  however,  those  in  control  found 
themselves  face  to  face  with  a  constantly  rising  rate  for 
money.  In  the  fall,  European  bank-rates  were  all  advanced 
to  record  figures,  and  on  this  side  call-money  reached  125 
per  cent. 


234  PROGRESS  OF  THE   EMPIRE   STATE 

The  years  of  active  speculation  preceding  the  panic 
naturally  saw  an  enormous  expansion  of  bank-credit. 
The  flotation  of  all  these  new  securities  and  the  speculation 
by  which  the  process  was  accompanied  were  a  heavy  strain 
upon  the  credit  resources  of  the  country.  As  each  new 
issue  of  stocks  and  of  bonds  was  made,  it  was  necessary  for 
the  underwriting  syndicates  to  borrow  millions  of  dollars 
in  order  to  carry  the  load,  and  in  many  cases,  where  the 
marketing  of  the  securities  was  not  readily  effected,  it  was 
necessary  to  continue  these  borrowings  for  a  very  consider- 
able time.  The  speculative  activity  by  which  these  years 
were  marked  also  imposed  a  heavy  strain  upon  the  banks. 
In  spite  of  the  large  participation  of  the  public  in  the  stock- 
market  from  1900  to  1907,  the  bulk  of  the  operations  carried 
on  was  conducted  by  strong  interests  relying  absolutely 
upon  supplies  of  money  borrowed  from  the  banks.  Time 
after  time,  during  these .  years,  the  available  supply  was 
used  up  and  it  was  necessary  to  go  into  the  foreign  markets 
for  accommodation.  That  happened  at  the  end  of  1902 
and,  as  we  have  seen,  it  happened  in  an  even  greater  degree 
in  the  summer  of  1906.  The  period  was  one  of  almost 
continuous  expansion,  and,  finally,  of  inflation.  Writing 
of  these  conditions,  Joseph  French  Johnson,  in  his  able 
treatise  entitled  The  Crisis  and  Panic  of  1907,  says: 

"In  1897  the  cash  reserves  of  commercial  banks  and 
trust  companies  in  the  United  States  amounted  to  about 
eighteen  per  cent,  of  the  net  liabilities.  Thereafter  there 
was  a  steady  decline  until  1907,  when  the  cash  reserve  had 
dwindled  to  ten  per  cent.  Mr.  Miihleman  in  a  new  edition 
of  his  Monetary  and  Banking  Systems — a  most  intelligent 
and  satisfactory  manual  of  financial  statistics — gives  on 
page  107  a  table  showing  a  decline  in  total  bank  reserves 
from  17.9  per  cent,  in  1897  to  11.3  in  1907.  In  the  same 
table  he  shows  that  the  amount  of  money  and  bank  deposits 


THE  CRISIS  OF  1907  235 

'in  the  hands'  of  the  people  increased  during  this  period 
from  #4,000,000,000  to  over  $11,000,000,000.  The  decline 
in  the  ratio  of  banking  reserve  was  due  principally  to  two 
circumstances:  (1)  the  growth  of  trust-company  deposits, 
supporting  which  there  was  a  reserve  of  barely  five  per  cent. ; 
(2)  the  relatively  smaller  cash  reserves  kept  in  the  country 
banks,  many  of  these  institutions  having  been  tempted  by 
high  rates  of  interest  to  invest  heavily  in  call  loans  and 
time-paper  in  New  York  City.  It  is  true  that  the  amount 
of  cash  in  the  vaults  of  country  banks  increased  after  1897, 
yet  their  liabilities  grew  in  greater  proportion.  This 
decline  of  the  country's  banking  reserve  is  regarded  by 
some  as  a  sufficient  explanation  of  the  crisis.  In  my 
opinion,  however,  it  can  be  regarded  merely  as  evidence 
that  the  lending  power  of  the  banks  was  severely  strained, 
and  that  any  further  great  extensions  of  credit  were  there- 
fore impossible.  The  country's  low  bank  reserve  in  1906 
certainly  meant  that  the  country's  business  could  not  go 
on  booming  and  expanding  as  it  had  done  in  the  preceding 
years,  but  it  did  not  necessarily  presage  disaster.  The 
situation,  however,  was  bad  enough  to  make  every  conser- 
vative man  careful  as  to  his  ventures.  If  in  1906  the  banks 
of  the  country  could  have  had  competent  leadership  and 
could  have  been  made  to  see  the  necessity  for  the  careful 
husbanding  of  their  resources  and  for  the  restriction  of  their 
advances  upon  high-priced  collateral,  the  year  1907  would 
probably  have  passed  without  any  great  financial  shock  or 
serious  loss  to  business  interests.  Unfortunately,  however, 
there  was  no  leader. 

"Another  weakness  in  the  banking  situation  lay  in  the 
relative  decline  of  the  ratio  of  capital  and  surplus  to  liabili- 
ties. The  banking  laws  in  this  country  do  not  require 
that  a  bank's  capital  shall  bear  any  definite  relation  to  the 
amount  of  its  liabilities,  yet  from  some  points  of  view  such 


236  PROGRESS  OF  THE   EMPIRE  STATE 

a  requirement  would  be  more  reasonable  and  more  useful 
than  the  well-known  reserve  requirements.  As  a  result, 
our  banks  are  in  the  habit  of  expanding  their  business 
without  regard  to  the  amount  of  their  capital  investment, 
the  latter  seldom  being  increased  except  when  the  directors 
believe  that  in  this  way  the  institution  can  win  greater 
favor  with  the  public.  After  1897  there  was  considerable 
increase  in  the  total  of  banking  capital  and  surplus  in  the 
United  States,  but  it  was  not  proportionate  to  the  immense 
expansion  of  banking  liabilities." 

From  1897  to  1907,  a  new  element  of  weakness  was 
injected  into  the  situation  by  the  great  development  of 
trust  companies  and  State  banks,  without  any  proper 
correlation  to  the  national  banking  system.  These  State 
institutions  were  not  only  not  required  to  keep  adequate 
reserves,  but  even  the  reserves  required  were  permitted  to 
be  kept  in  bank  notes.  Thus  their  deposit  and  credit 
operations  were  capable  of  expanding  to  enormous  propor- 
tions without  any  definite  relation  to  gold.  And  such  an 
expansion  actually  occurred.  Within  seven  years,  from 
1900  to  1907,  total  liabilities  of  State  banking  institutions 
and  trust  companies  expanded  by  more  than  five  thousand 
millions  of  dollars,  while  cash  reserves  expanded  by  only 
about  #171,000,000,  and  national  bank-note  issues  expanded 
by  about  $440,000,000.  As  these  bank  notes  are  secured 
by  evidences  of  the  public  debt  and  not  to  any  appreciable 
extent  by  gold  reserves,  it  becomes  apparent  how  one  form 
of  credit  was  built  upon  another,  until  the  whole  fabric 
became  a  house  of  cards  which  a  zephyr  might  topple  in 
ruins. 

And  to  this  fragile  nature  of  the  structure  was  added 
the  fact  that  there  was  no  refuge  to  which  to  look  in  time 
of  storm,  like  the  central  banks  of  Europe,  nor  even  a 
system    of   cooperation    for   guarding    against   a   common 


THE  CRISIS  OF  1907  237 

danger.  For  the  national  banks,  and  a  few  of  the  State 
banks  of  New  York  City,  there  did  indeed  exist  the  Clearing- 
House  Committee,  and  through  its  existence  it  became 
possible  to  take  certain  steps  to  avert  shipwreck  after  the 
storm  had  reached  its  worst;  but  among  the  trust  companies 
there  was  not  even  this  slender  bond  of  union.  When 
the  Clearing  House  required  of  New  York  City  trust 
companies,  early  in  1903,  that  they  should  gradually 
accumulate  ten  per  cent,  in  cash  reserves  against  their 
demand  deposits,  they  withdrew  from  the  Clearing  House 
rather  than  comply  with  the  requirement;  and  they  made 
no  move  to  secure  reinstatement  after  the  State  Legislature 
in  1906  required  of  all  such  companies  a  reserve  of  fifteen 
per  cent.,  of  which  only  one  third,  however,  need  be  in 
cash,  and  the  other  two-thirds  might  be  respectively  on 
deposit  in  other  banking  institutions  or  invested  in  pre- 
scribed securities.  In  this  position  of  expansion  and  of 
isolation,  therefore,  the  trust  companies  stood  when  the 
storm  of  1907  broke,  adding  a  portentous  burden  to  the 
structure  of  credit  sustained  by  the  reserves  of  the  national 
banks,  upon  which  the  entire  structure  thus  ultimately 
rested. 

However  much  economists  may  disagree  concerning 
the  influence  upon  prices  of  the  production  of  gold,  there 
is  no  doubt  that  the  way  in  which  such  production  increased 
during  the  ten  years  ending  with  1907  had  much  to  do  with 
the  expansion  in  bank  credit  which  preceded  the  crisis. 
The  average  annual  production  of  gold  for  the  twenty  years 
ending  with  1890  was  #110,544,000.  Then  for  the  twelve 
years  ending  with  1902  came  an  annual  average  production 
of  #221,635,000.  The  total  production  during  these  twelve 
years  was  #2,659,624,000,  which  was  nearly  30  per  cent, 
of  the  total  production  for  the  long  span  of  four  centuries 
ending  with  1890.     The  production  of  the  next  five  years 


, 


238  PROGRESS  OF  THE   EMPIRE   STATE 

exceeded  #1,850,000,000.     Official  estimates  for  these  five 
years  are  as  follows: 

Gold  Production  of  the  World,  1903-1907 

Year  Value 

I9°3 $327,702,700 

IQ°4 347,087,300 

1905 380,288,700 

1906 402,503,000 

1907 412,966,600 

Total $1,870,548,300 

When  this  prodigious  total  for  five  years  is  added  to  the 
production  of  the  previous  twelve  years,  a  total  is  obtained 
for  seventeen  years  of  $4,530,172,300.  Thus,  within  less 
than  twenty  years,  production  reached  an  amount  equiva- 
lent to  more  than  half  of  the  entire  production  of  the  preced- 
ing four  centuries.  Even  these  figures  do  not  reveal  the 
increase  in  the  proportion  available  for  money,  which  bore 
a  much  greater  ratio  to  the  preexisting  stock.  The  amount 
required  for  the  arts  increased  from  year  to  year,  but 
did  not  keep  pace  with  the  ratio  of  production.  If  in 
1890  about  $60,000,000  was  absorbed  throughout  the  world 
for  industrial  purposes  and  the  arts,  only  about  $50,000,000 
of  the  annual  product  was  left  available  for  additions  to 
the  monetary  stock;  while  in  1906,  even  with  a  consumption 
in  the  arts  estimated  at  $121,601,200,  the  amount  left 
available  as  money  was  about  $280,000,000,  or  more  than 
five  times  the  average  of  the  years  ending  with  1890. 

It  would  be  natural,  under  any  theory  of  money,  that 
this  great  addition  to  the  monetary  stock  should  have  an 
influence  upon  prices  and  the  condition  of  credit.  Funda- 
mentally, it  is  the  supply  of  other  things  than  gold  which 
determines  the  ability  of  a  community  to  build  railways, 


THE  OLD  MORGAN  OFFICE  BUILDING 

The  Drexel  Building,  better  known,  perhaps,  as  the  Morgan 
Office  Building,  at  23  Wall  Street,  was  closed  soon  after  the  death 
of  Mr.  Morgan  on  March  31,  [913,  and  has  since  been  pulled 
down.     Arrangements  had  already  been  made  before  Mr. 

11   to  take  offices  temporarily  in  Trust 

ing,  at  14  Wall  ending  the  erection  of  a  new  build- 

ing 01  ate.     The  old  building  was  a  seven-story  marble 

or  mansard   roof,   completed    in    1873. 
Mr.   '  andon  the  old  strut 

whicl  1  to  belong  to  the  Drexel  estate  until  purchased  by 

□  the  spring  of  [912.     A 
and  Broad  Si  3  purchased  by  Mr. 

quare  foot, — a  price 
which  in  Wall  Street  at  the  time.     Additional 

land  has  been  acquired  for  the  new  structure,  which  will  be  seven 
or  eight  stories  in  height,  but  with  foundations  sufficiently  strong 
for  the  erection  of  additional  stories  if  required.  The  cost  of  the 
building  will  be  from  $1,500,000  to  $2,000,000. 


THE  CRISIS  OF  1907  239 

houses,  and  factories.  It  requires  rails  and  steel  beams, 
machinery  and  labor.  But  the  fact  that  these  can,  under 
normal  conditions,  be  obtained  for  gold  obscures  the  import- 
ance of  the  part  they  play,  until  the  community  is  brought 
face  to  face  with  scarcity  of  supply  in  relation  to  demand 
or  with  scarcity  of  consumable  goods  necessary  to  the 
ordinary  processes  of  life.  The  influx  of  new  gold  into 
bank  reserves  tends,  other  things  being  equal,  to  stimulate 
speculation  in  both  securities  and  goods,  whence  may  occur 
a  rise  in  prices.  The  fact  that  the  problem  remains  essen- 
tially one  of  capital  and  credit  rather  than  of  the  stock  of 
gold  was  demonstrated,  however,  by  the  conditions  of  the 
crisis  of  1907.  In  spite  of  the  outpour  of  gold  from  the 
mines  at  a  rate  never  equalled  or  approached  in  the  history 
of  the  race,  demand  outran  supply,  the  new  gold  did  not 
offset  the  maladjustments  of  capital,  and  the  money  markets 
found  gold  an  unsatisfying  aliment  when  what  was  required 
was  more  capital  in  forms  adapted  to  the  continuance  of 
production. 

The  effect  of  this  great  expansion  of  loans  made  itself 
felt  in  every  part  of  the  world.  Long  before  the  final 
crash  there  were  many  signs  of  weakness.  To  enumerate 
them  all  is  unnecessary — some  of  the  striking  cases  are 
sufficient  to  illustrate.  In  Russia,  newly  dowered  with  the 
gold  standard  by  the  skill  of  Count  Witte  and  encouraged 
by  the  consequent  influx  of  foreign  capital,  prices  rose 
rapidly  in  1898  and  1899.  The  far-sighted  Minister  of 
Finance  gave  a  warning  in  vain,  early  in  the  latter  year,  to 
the  bankers  of  St.  Petersburg  of  the  danger  of  locking  up 
their  resources  in  speculation.  The  Bank  of  Russia  was 
compelled  to  come  to  the  rescue  of  the  market,  and  on 
September  23,  1899,  there  was  a  crash  in  bank  shares  and 
industrial  securities  which  carried  them  down  by  from  20 
to  50  per  cent. 


240  PROGRESS  OF  THE   EMPIRE  STATE 

The  loss  of  capital  in  Russian  enterprises  had  its  reaction 
in  Germany  and  Belgium,  whence  much  of  the  money  for 
these  enterprises  had  come.  In  Germany,  efforts  to  main- 
tain high  prices  for  iron  and  coal  were  made  by  the  large 
syndicates  by  curtailing  production,  but  they  were  only 
partially  effective.  Banks  which  had  tied  up  their  capital 
in  new  industrial  projects  found  themselves  unable  to 
fulfill  their  obligations.  Two  mortgage  banks  failed  in  the 
autumn  of  1900,  because  they  had  been  speculating  in 
real  estate  through  subsidiary  companies.  The  failures 
caused  a  panic  in  mortgage  bonds,  which  was  most  acute 
in  the  case  of  two  companies — the  Bank  of  Pomerania  and 
the  Mortgage  Bank  of  Mecklenburg-Strelitz.  Bonds  of 
the  former  fell  from  98^  to  77,  and  of  the  latter  from  100 
to  49;  but  the  discount  banks  came  to  their  aid  and  they 
were  saved  from  failure. 

On  the  heels  of  the  mortgage  bank  failures  came  diffi- 
culties in  two  large  institutions  of  a  different  character. 
One  of  these,  the  Dresdner  Creditanstalt,  was  aided  tem- 
porarily by  other  institutions,  but  was  eventually  compelled 
to  liquidate.  The  other,  the  Bank  of  Leipzig,  with  a 
capital  of  #12,000,000  and  12,000  depositors,  went  down 
at  once.  To  a  single  industrial  syndicate,  the  Trebertrock- 
nung  Gesellschaft,  advances  had  been  made  under  various 
accounts  to  the  amount  of  #21,000,000.  The  head  of 
the  Leipziger  Bank  was  refused  aid  when  he  sought  it  at 
Berlin,  in  spite  of  the  fact  that  its  failure  was  sure  to 
cause  pressure  upon  other  institutions.  A  serious  run  fol- 
lowed upon  the  banks  of  Saxony,  and  some  small  institu- 
tions and  many  industrial  companies  went  into  liquidation. 
Much  money  was  lost  in  tramways  and  other  electrical 
enterprises.  Of  443,550,000  marks  (#106,000,000)  in 
nominal  capital  for  twenty-one  companies,  most  of  the 
shares  being  quoted  far  above  par,  there  were  losses  in 


THE  CRISIS  OF  1907  241 

market  quotations  between  January  1, 1899,  and  October  15, 
1901,  which  amounted  to  270,810,000  marks  (#64,500,000), 
or  61  per  cent,  of  the  earlier  quotations. 

The  fourth  important  influence  which  operated  to 
bring  on  the  panic  was  the  dissipation  of  capital  as  a  result 
of  the  three  wars  which  took  place  during  the  ten  years 
preceding  the  panic  period — the  Spanish-American  War, 
the  Boer  War,  and  the  Russo-Japanese  War.  That  the 
great  expenditures  attending  a  war  create  activity  in 
certain  industrial  lines  is,  of  course,  true,  but  students  of 
economic  conditions  are  all  agreed  that  the  wasting  of 
capital  in  an  unproductive  manner  has  a  strong  tendency 
toward  raising  the  rate  of  interest.  If  the  thousand  dollars 
which  the  small  man  has  in  his  bank,  available  for  the  uses 
of  commerce  and  industry,  is  invested  in  a  government 
bond  issued  for  the  purpose  of  helping  to  carry  on  a  war, 
the  money  is  consumed  in  an  unproductive  use.  And 
this  happened  on  a  tremendous  scale  during  the  progress 
of  the  three  wars  which  occurred  between  1898  and  1907. 

The  war  in  South  Africa  cost  the  British  Government 
nearly  #800,000,000  and  resulted  in  loans  to  the  amount 
of  nearly  #600,000,000.  The  effect  was  severely  felt  in 
the  money  market  in  restricting  the  supply  of  capital  for 
other  classes  of  investments.  Especially  was  the  issue  of 
large  quantities  of  new  securities  felt  upon  the  price  of 
British  consols.  Quotations  had  been  as  high  in  1896  as 
114^.  The  reduction  of  the  interest  rate  from  2^  to  2^ 
per  cent,  took  effect  in  1903  and  had  some  influence  in 
depressing  prices,  but  the  influences  which  were  most 
potent  in  carrying  down  consols  to  a  minimum  price  of  91 
in  1901,  and  80^  in  the  autumn  of  1907,  were  the  great 
demands  for  capital  and  the  increase  in  the  amount  of 
consols  on  the  market. 

The  war  between  Russia  and  Japan  began  in  February, 

16 


242  PROGRESS  OF  THE   EMPIRE  STATE 

1904,  and  hostilities  practically  ceased  in  June,  1905. 
The  attack  of  the  Japanese  upon  the  Russians  was  followed 
by  a  serious  break  in  the  markets  of  Paris  and  Berlin,  but 
partial  recovery  soon  took  place.  The  estimated  cost  of 
the  war  to  Russia  was  about  #840,000,000,  but  this  did  not 
represent  the  disbursements  after  the  peace.  The  cost 
to  Japan,  up  to  the  close  of  1906,  was  officially  calculated 
at  about  #1,000,000,000.  The  war  between  Spain  and  the 
United  States  in  1898,  though  of  minor  importance,  cost 
the  United  States  about  #165,000,000,  and  for  a  time 
seriously  impaired  Spanish  credit.  Thus,  in  these  several 
conflicts  in  arms  were  expended  not  less  than  #2,800,000,000, 
making  demands  upon  the  savings  of  the  world  equal  to 
more  than  the  usual  output  of  all  classes  of  securities  for 
an  entire  year. 

The  outward  signs  of  these  causes  which  operated  finally 
to  bring  about  the  crisis  of  1907  were  visible  at  least  a  full 
year  before,  but  the  warning  was  not  generally  heeded. 
Proof  of  this  is  afforded  by  what  happened  in  the  stock 
market  during  the  first  quarter  of  the  year.  The  specula- 
tion at  the  end  of  1906  had  gone  over  into  the  beginning  of 
1907,  which  found  the  floating  supply  of  stocks  concentrated 
in  the  hands  of  the  strongest  interests  in  the  country. 
There  is  no  longer  much  mystery  about  the  "  silent  "  panic 
of  the  middle  of  March.  It  is  generally  realized  now  and 
admitted  that  the  complete  drying  up  of  the  springs  of 
capital  took  those  who  were  carrying  the  bulk  of  stocks 
entirely  unawares,  and  forced  upon  them  a  liquidating 
movement  almost  without  parallel  in  stock  market  history. 
The  ordinary  investor  remembers  "1907"  by  the  smash  in 
the  stock  market  which  took  place  in  October  and  the  sus- 
pension of  banking  facilities  by  which  it  was  followed. 
Many  of  the  strongest  and  richest  men  in  the  country 
remember    1907    rather    by    the    cruel    losses   which    were 


THE  CRISIS  OF  1907  243 

inflicted  upon  them  in  the  March  smash,  six  months  before 
the  real  panic  occurred.  Caught  unawares,  they  were 
compelled  to  jettison  great  masses  of  stocks  at  prices  which, 
in  the  case  of  many  prominent  issues,  were  almost  as  low 
as  those  reached  when  the  main  crisis  later  on  in  the  year 
was  at  its  height. 

Events  during  the  early  summer  were  not  encouraging 
to  the  market.  The  government  prosecutions  of  corpora- 
tions culminated  in  the  fine  of  #29,240,000  imposed  upon 
the  Standard  Oil  Company  of  Indiana,  upon  1462  counts, 
for  rebating.  The  scarcity  of  capital  was  indicated  by  the 
failure  of  bond  offerings  by  leading  cities  whose  credit  was 
above  reproach.  On  August  9th,  an  offer  by  the  city  of 
Boston  of  #4,000,000  in  4  per  cent,  bonds  brought  bids 
for  only  $200,000.  Three  days  later  an  offer  by  the  city 
of  New  York  of  #15,000,000  4  per  cents  brought  bids  of 
only  #2,713,815,  at  par.  The  market  recovered  slowly 
and  fitfully  for  a  time,  but  suffered  another  downward 
movement  in  July  and  August,  which  carried  prices  in 
some  cases  below  the  level  of  March.  Even  after  these 
events,  however,  although  it  was  known  that  many  indi- 
viduals had  suffered  seriously  and  that  loans  had  been  called 
in  large  amounts  by  the  banks,  there  was  no  important 
bank  failure  and  no  indication  of  serious  disaster  until  the 
middle  of  October. 

As  in  most  panics,  the  crash  came  suddenly  and  at  an 
unexpected  moment.  It  began  through  the  inability  of 
certain  persons  who  were  speculating  in  copper  stocks  to 
continue  the  operations  which  they  had  been  carrying  for  a 
rise.  A  fall  in  the  price  of  copper  metal  affected  adversely 
most  of  the  copper  securities.  Under  the  misapprehension 
that  a  corner  had  been  created  in  United  Copper,  quotations 
were  run  up  in  a  few  days  from  37  to  60.  All  the  stock 
bought   by  the  bull   pool,  with    a  view   of  squeezing    the 


244  PROGRESS  OF  THE   EMPIRE  STATE 

bears,  was  delivered  to  them.  The  brokers  found  themselves 
unable  to  pay  for  it,  the  stock  dropped  on  October  16th  to 
10,  and  it  soon  developed  that  a  chain  of  banking  institu- 
tions had  become  deeply  involved  in  their  operations. 
The  result  was  that  several  banks — the  Mercantile  National, 
the  National  Bank  of  North  America,  the  New  Amsterdam 
National  Bank,  and  a  few  smaller  ones — appealed  to  the 
Clearing  House  Committee  for  aid  in  meeting  the  adverse 
balances  which  confronted  them  at  the  Clearing  House. 

These  conditions  afforded  an  opportunity  for  the  more 
conservative  bankers  on  the  committee  to  accomplish 
what  they  had  long  desired — the  elimination  of  a  certain 
group  of  speculators  from  American  banking.  The  latter 
were  notified  that  the  resignations  of  officers  and  directors 
must  be  placed  in  the  hands  of  the  Clearing  House  Com- 
mittee, and  new  officers  appointed,  if  aid  was  to  be  extended. 
There  was  nothing  to  do  but  to  comply  with  this  demand. 
New  officers  were  appointed,  and  the  institutions  endeavored 
to  continue  doing  business.  On  Monday  night,  October 
2 1 st,  however,  application  for  aid  was  made  to  the  Clearing 
House  Committee  by  the  Knickerbocker  Trust  Company, 
the  third  largest  trust  company  in  New  York,  having 
deposits  of  nearly  $60,000,000.  It  developed  that  its 
assets  were  to  a  considerable  extent  locked  up  in  enterprises 
which  could  not  be  immediately  liquidated,  and  that  the 
president  had  been  in  close  business  relations  with  the 
controlling  spirits  in  the  National  Bank  of  North  America. 
The  National  Bank  of  Commerce,  which  attended  to  the 
clearings  of  the  Knickerbocker  Trust  Company,  finding 
a  heavy  unsettled  balance  against  the  company,  refused  to 
clear  for  it,  and,  after  a  run  in  which  about  $8,000,000  were 
paid  out,  the  company,  on  October  22d,  closed  its  doors. 

The  next  morning  began  a  run  upon  the  Trust  Company 
of  America,   also  having  deposits  of  nearly  $60,000,000, 


/         / 


Ul.  MM^^- 


SETH  MELLEN  MILLIKEN 

Capitalist;  born  in  Poland,  Maine,  January  7,  1836;  son  Josiah 
and  Elizabeth  (Freeman)  Milliken;  educated  in  public  schools, 
Hebron  Academy,  and  Yarmouth  Academy;  married  in  1874, 
Margaret  L.  Hill.  Began  business  life  at  Minot,  Maine,  in  1856; 
16  founded,  with  William  1  )eering,  and  is  now  senior  member, 
the  firm  of  Deering,  Milliken  &  Co.;  president  .and  director  Cowan 

I. aine),  Dallas  Mfg.  Co.  (Ala.),  Farnswortl 
(Maine),  Gainesville  Cotton  Mills  (Ga.),  Great  Falls  Woolen  Co. 
iN.  II.),  Malison  Woolen  Co.  (Maine),  Pondichcrry  Co.  (Maine); 
trustee  Bowery  Savings  Bank,  Colonial  Trust  Co.;  director 
Albeville  Cotton  Mills  (S.  C),  Cascade  Woolen  Co.  (Maine), 
Darlington  Mfg.  Co.  (S.  C),  Drayton  Mills  (S.  C),  Fidelity 
Bank,  Forest  Mills  Co.  (Maine),  Hartsville  Cotton  Mill  (S.  C), 
Laurens  Cotton  Mills  (S.  C),  Lockhart  Mills  (S.  C),  Lockwood 
Co.  (Maine),  Mills  Mfg.  Co.  (S.  C),  Monarch  Cotton  Mills  (S.  C), 
Pacolet  Mfg.  Co.  (S.  C),  Poland  Paper  Co.  (Maine),  and  other 
corporations.     Was  Republican  Presidential  elector,  1892. 


THE  CRISIS  OF  1907  245 

which  proved  to  be  the  most  serious  run  ever  made  upon  a 
banking  institution  without  destroying  it.  Within  about 
two  weeks  the  sum  of  #34,000,000  was  paid  in  cash  to 
depositors  and  in  settlement  of  checks  presented  by  other 
banking  institutions.  A  run  also  began  upon  the  Lincoln 
Trust  Company,  which  reduced  its  deposits  within  a  short 
time  from  about  #20,000,000  to  about  #6,000,000. 

Under  the  strain  of  panic  and  the  rigidity  of  the  currency 
system,  American  banking  broke  down  as  it  had  done  in 
1857  and  1893.  On  Saturday,  October  26th,  the  New 
York  Clearing  House  Committee  decided  upon  the  issue 
of  Clearing  House  certificates  on  the  following  Monday, 
and  on  the  same  day  payment  of  checks  in  currency  was 
generally  suspended  at  the  New  York  banks,  and  the  same 
policy  was  adopted  by  banks  throughout  the  country. 
Clearing  House  certificates  were  issued  directly  by  Clearing 
House  committees  in  leading  cities.  The  amounts  issued 
at  the  principal  cities  were:  New  York,  #100,000,000; 
Chicago,  #37,505,000;  Philadelphia,  #13,295,000;  Boston, 
#11,995,000;  St.  Louis,  #12,965,000;  Pittsburg,  #5,855,000; 
Baltimore,  #2,520,000;  Milwaukee,  #3,260,000.  In  Pitts- 
burg and  many  other  cities,  certificates  or  checks  of  small 
denominations  were  issued  for  general  circulation.  In 
Pittsburg  the  Stock  Exchange  was  closed,  and  in  several 
Western  States  bank  holidays  were  declared  by  the 
governors. 

These  measures  did  not  entirely  allay  alarm,  and  deposits 
in  many  banks  and  trust  companies  in  New  York  continued 
to  be  withdrawn  and  hoarded  in  currency.  The  refusal 
of  the  banks  to  pay  currency  for  checks  caused  a  so-called 
"premium  on  currency,"  which  rose  as  high  as  4^  per 
cent.,  and  was  for  a  considerable  time  at  3  per  cent.  It 
was  estimated  that  during  October  and  November  not  much 
less  than  #25,000,000  in  currency  was  sold  by  brokers  in 


246  PROGRESS  OF  THE   EMPIRE  STATE 

the  financial  district  for  checks.  Almost  immediately, 
also,  the  New  York  banks  began  to  feel  the  strain  of  the 
demand  from  their  correspondents  in  the  interior  for  the 
return  of  their  reserve  deposits.  It  was  calculated  that 
from  the  beginning  of  the  panic  to  the  close  of  December 
about  #296,000,000  in  currency  was  absorbed  throughout 
the  country,  and  that  of  this  sum  #218,000,000  passed 
through  the  banks  of  New  York. 

The  actual  breaking  of  the  storm  found  the  officials  of 
the  Treasury  Department  very  much  alive  to  the  situation 
and  ready  to  afford  whatever  relief  was  possible.  As  early 
as  August,  the  Secretary  of  the  Treasury,  realizing  that  the 
monetary  situation  was  gradually  becoming  more  threaten- 
ing, took  the  unusual  step  of  making  weekly  deposits  in 
banks  in  all  sections  of  the  country  with  a  view  to  facilitat- 
ing the  fall  movement  of  the  crops,  by  anticipating  the 
demand  for  currency  that  accompanies  such  movement. 
Beginning  on  August  28th,  and  continuing  each  week  until 
October  14th,  deposits  were  allotted  to  various  banks  to  a 
total  amount  of  #28,000,000,  covering  forty-six  States  and 
Territories.  Every  effort  was  made  so  to  distribute  this 
fund  that  it  would  meet  actual  needs  in  sections  where 
business  activity  was  at  the  maximum  and  currency  was 
most  urgently  needed.  To  the  extent  that  it  was  possible 
to  apply  it,  this  relief  saved  the  New  York  banks  the 
additional  burden  always  thrown  upon  them  at  the  crop- 
moving  period. 

In  order  to  meet  the  demand  for  currency  by  the  institu- 
tions which  were  subjected  to  pressure,  the  Treasury 
Department  forwarded  to  New  York  within  three  days 
about  #36,000,000  in  small  bills.  While  these  were  not  in 
all  cases  used  in  making  direct  deposits  of  public  moneys 
in  the  banks,  they  were  available  at  the  Subtreasury  for  any 
banking  institution  which  desired  to  obtain  them  in  exchange 


THE  CRISIS  OF  1907  247 

for  hills  of  larger  denomination  or  for  coin.  At  a  later 
date,  gold  coin  was  paid  in  many  cases,  at  the  request  of 
certain  institutions,  hecause  they  found  that  payment  of 
coin  to  depositors  tended  in  a  measure  to  discourage  runs. 
It  was  not  because  the  coin  was  preferred  to  notes;  on  the 
contrary,  it  was  because  depositors  did  not  desire  to  be 
burdened  with  taking  away  the  coin,  and  would  have  pre- 
ferred notes  of  large  denomination.  It  is,  indeed,  a  source 
of  gratification  that  at  no  period  of  the  crisis  was  there 
the  slightest  suspicion  of  the  integrity  of  the  currency 
issued  either  by  the  Government  or  by  national  banks. 
The  effect  of  the  law  of  March  14,  1900,  in  creating  an 
adequate  gold  reserve  and  providing  necessary  measures 
to  replenish  the  reserve  in  case  of  need,  so  completely  set 
at  rest  any  distrust  of  the  exchangeability  of  all  forms  of 
paper  for  gold  that  the  subject  was  hardly  mentioned 
anywhere,  except  as  a  cause  of  congratulation  upon  the 
effects  of  the  Gold  Standard  Act.  The  transfer  of  large 
amounts  of  gold  from  the  Treasury  to  the  banks  made  it 
necessary  to  run  the  mints  at  high  pressure  in  order  to 
comply  with  the  requirements  of  the  act  of  March  14,  1900, 
that  not  more  than  #50,000,000  of  the  legal  gold  reserve 
of  #150,000,000  should  be  kept  in  bullion.  There  was  at 
no  time  any  disposition  to  convert  any  form  of  govern- 
ment paper  into  gold  because  of  any  question  as  to  safety  of 
the  paper,  nor  was  there  any  disposition  to  present  gold 
certificates  for  redemption  in  gold  coin. 

While  the  action  of  the  Treasury  Department  in  placing 
large  sums  in  the  national  banks  in  New  York  was  sub- 
jected to  some  criticism,  it  was  amply  justified  by  the  con- 
ditions as  they  then  existed  and  as  they  have  been  disclosed 
in  the  light  of  subsequent  events.  Figures  show  that  the 
national  banks  in  New  York  did  not  retain  in  their  own 
keeping   the   public   moneys   received,    but   were   enabled 


248  PROGRESS  OF  THE   EMPIRE  STATE 

through  their  extended  relations  as  reserve  depositories 
with  banks  of  all  classes  throughout  the  country  to  employ 
these  moneys  to  meet  a  large  proportion  of  the  calls  made 
upon  them. 

An  examination  of  the  deposits  made  by  the  Treasury 
in  the  banks,  from  time  to  time,  commencing  in  the  middle 
of  October,  will  show  that  as  the  stringency  progressed  the 
Treasury  gave  relief  in  every  important  locality  where 
assistance  seemed  to  be  required.  Some  of  the  more 
important  deposits  were  as  follows:  New  York,  $35,000,000; 
Chicago,  $3,000,000;  Pittsburg,  $1,500,000;  Cincinnati, 
$1,500,000;  Minneapolis  and  St.  Paul,  $500,000;  and  in 
many  places  in  the  South  and  West,  the  public  revenues, 
which  ordinarily  would  be  remitted  to  the  various  sub- 
treasuries,  and  thus  taken  out  of  circulation,  were  allowed 
to  accumulate  in  national  bank  depositories. 

Obviously,  when  the  pressure  was  focused  to  the  extent 
which  has  been  set  forth  on  the  financial  center  of  the 
country,  it  seemed  advisable  to  focus  relief  there  also. 
The  national  banks  of  New  York  City  held  on  August  22d 
only  $28,253,386  in  deposits  of  public  money,  aside  from 
certain  balances  of  disbursing  officers,  or  considerably  less 
than  3  per  cent,  of  the  national  banking  capital  of  the  city. 
The  United  States  deposits  in  national  banks  in  all  other 
places  were  about  $115,000,000,  or  more  than  12  per  cent, 
of  the  national  banking  capital  of  the  remainder  of  the 
country.  It  is  plain,  therefore,  under  the  policy  of  recall- 
ing the  public  funds  which  was  inaugurated  in  the  spring, 
that  the  national  banks  of  New  York  were  not  favored  with 
any  large  proportion  of  public  moneys,  but,  if  any  uninten- 
tional discrimination  was  shown,  were  treated  less  favorably 
than  the  banks  of  other  sections  of  the  country. 

While  the  Secretary  of  the  Treasury  felt  compelled,  in 
order  to  meet   the   exigencies  of  the  situation,  largely  to 


THE  CRISIS  OF  1907  249 

increase  deposits  in  the  banks  of  New  York  City,  even  the 
proportion  left  in  their  custody  after  the  panic  had  subsided 
was  smaller  than  the  proportion  in  certain  other  cities  and 
States.  A  table  of  the  distribution  of  government  deposits  on 
December  7,  1907,  by  States  and  by  sections  of  the  Union, 
shows  that  the  amount  of  public  deposits  on  that  date  in 
the  entire  country  was  #222,352,252,  which  was  15.3  per 
cent,  of  national  banking  capital  and  surplus,  amounting 
to  #1,451,296,366.  While  the  banks  of  the  State  of 
New  York  appear  as  holders  of  public  moneys  to  the  amount 
of  26.8  per  cent,  of  their  capital  and  surplus,  the  banks  of 
the  New  England,  Eastern,  and  Middle  Western  States, 
taken  as  a  whole  and  including  New  York,  show  a  propor- 
tion of  deposits  to  capital  and  surplus  of  only  a  little  more 
than  15  per  cent.  The  banks  of  the  Southern,  Western, 
and  Pacific  States,  on  the  other  hand,  show  a  proportion 
of  nearly  18  per  cent.  With  the  elimination  of  New  York 
from  the  Eastern  group,  the  percentage  of  the  remaining 
Eastern  and  Middle  Western  States  is  only  about  11.2. 

These  public  funds  were  distributed  among  1421  national 
banks.  The  object,  of  course,  in  distributing  public  money 
is  not  to  afford  profit  to  banks  as  such,  but  to  afford  to  the 
business  community  means  for  carrying  on  its  transactions 
upon  a  normal  basis  of  money  supply  and  interest  charges. 
It  was  not  thought  necessary  by  the  Department  to  extend 
the  distribution  of  public  funds  to  all  small  banks,  but  the 
aim  was  to  distribute  them  so  widely  in  every  part  of  the 
country  that  the  benefit  of  the  funds  thus  distributed  would 
reach  even  the  most  remote  quarters  through  the  increased 
power  of  making  loans  and  rediscounts  given  thereby  to 
the  stronger  banks  of  the  locality. 

An  effort  was  made  also  to  broaden  the  basis  upon  which 
public  deposits  might  be  made  by  extending  the  list  of 
bonds   acceptable    to   the   Treasury   Department.     Up   to 


250  PROGRESS  OF  THE    EMPIRE   STATE 

about  the  ist  of  October,  State,  railway,  and  municipal 
bonds  were  accepted  at  90  per  cent,  of  their  market  value, 
when  not  above  par,  when  such  bonds  came  within  the 
provisions  of  the  laws  of  the  States  of  New  York  and  Mas- 
sachusetts governing  investments  by  savings  banks.  At 
about  this  time  bonds  coming  within  the  provisions  of  these 
laws  became  very  scarce.  Banks  were  then  informed  that 
bonds  would  be  acceptable  which  came  within  the  laws  of 
Connecticut  and  New  Jersey,  thus  making  available  many 
millions  of  bonds  which  were  considered  as  good  security. 

After  the  offer  of  the  Secretary  of  the  Treasury  to  receive 
State,  railway,  and  municipal  bonds,  in  substitution  for 
government  bonds  to  be  transferred  to  circulation  account, 
as  above  referred  to,  a  few  bonds  not  strictly  in  conformity 
with  the  provisions  of  the  laws  of  any  of  these  States,  but 
yet  of  good  market  value,  were  accepted  at  the  rate  of 
75  per  cent,  of  their  market  value.  Under  a  strict  construc- 
tion of  the  laws  of  these  States,  the  bonds  of  several  of  the 
largest  municipalities  are  not  available  as  investments  for 
savings  banks,  owing  to  the  fact  that  their  percentage  of 
debt,  as  compared  to  assessed  valuation,  is  slightly  in  excess 
of  the  amount  stipulated  in  these  laws.  The  same  state- 
ment applies  in  a  measure  to  railroads.  There  are  several 
issues  of  second-mortgage  bonds,  which  in  point  of  security 
might  properly  be  classed  as  first-mortgage  bonds,  inasmuch 
as  the  first-mortgage  bonds  have  been  largely  paid,  or  a 
fund  established  to  pay  them  as  fast  as  presented.  In  some 
other  cases  also  the  mileage  of  the  railroad  is  not  quite 
sufficient  to  bring  its  bonds  within  the  class  of  investments 
legally  prescribed  for  savings  banks. 

The  Department  exercised  great  caution  in  the  accept- 
ance of  bonds  as  security  for  deposits,  and  in  nearly  all 
cases  where  bonds  were  accepted  which  were  not  legal 
savings  bank  bonds  they  were  marketable  at  a  price  equal 


-7T |7~ 


OHHDI. 


HERBERT  HAROLD  VREELAND 

Born  in  Glen,  New  York,  October  28,  1856.  In  1874  entered 
the  service  of  the  Long  Island  Railroad  Company  and  p 
through  each  grade  of  the  transportation  department  to  freight 
and  passenger  conductor.  In  1881  he  was  with  the  New 
and  Northern  Railroad  Company  as  conductor,  and  later  train 
.  superintendent,  general  superintendent,  and  general  man- 
ager. He  remained  with  this  company  until  1893,  when  he 
ted  the  presidency  of  what  was  then  known  as  the  Houston, 
Street  and  Pavonia  Ferry  Railroad  Company,  its  successors 
being  the  Metropolitan  Street  Railway  Company,  the  Interurban 
Street  Railway  Company, — now  the  New  York  City  Railroad 
Company, — and  the  Metropolitan  Securities  Company.  He 
was  afterwards  chief  executive  officer  of  the  corporation.  Under 
his  presidency  nearly  thirty  independent  and  competing  com- 
panies owning  franchises  were  united  in  one  system,  comprising 
every  surface  line  in  the  boroughs  of  Manhattan  and  the  Bronx. 


THE  CRISIS  OF  1907  251 

to,  and  in  some  cases  in  excess  of,  that  of  savings  bank  bonds. 
It  was  deemed  wise,  however,  as  they  were  not  classed  as 
savings  bank  bonds,  to  accept  them  at  a  lower  rate,  namely, 
75  per  cent,  of  their  market  value.  It  is  gratifying  to  be 
able  to  state,  as  evidence  of  the  care  with  which  the  entire 
situation  was  handled,  that  not  a  dollar  of  the  Government's 
money  was  lost  through  the  acceptance  of  inadequate 
security  or  through  the  failure  of  any  bank  to  return  its 
deposits  when  called  upon  to  do  so. 

All  possible  relief  in  the  way  of  increased  deposits  in  the 
national  banks  having  been  extended,  the  Treasury  Depart- 
ment turned  toward  bringing  about  an  increase  in  the 
supply  of  currency.  Here  the  great  trouble  was  in  the 
shortage  of  bonds  available  to  secure  additional  bank  notes. 
The  Department,  therefore,  notified  national  banks  that 
they  would  be  permitted  to  substitute  bonds  suitable  for 
savings  bank  investments  for  government  bonds  which 
were  held  as  security  against  public  deposits.  The  purpose 
of  this  measure  was  to  enable  the  banks  to  employ  the 
government  bonds,  which  were  thus  released,  as  security 
for  additional  bank-note  circulation,  in  conformity  with  the 
law.  To  this  offer  the  banks  responded  promptly,  and  as  a 
result  many  millions  of  additional  bank  notes  were  taken 
out  and  were  employed  in  meeting  the  currency  famine. 

As  usual  in  emergencies,  the  difficulty  of  obtaining 
bonds,  and  other  obstructions  of  detail,  prevented  the 
increase  in  circulation  becoming  effective  to  the  full  amount 
until  some  time  after  the  need  for  it  had  passed.  Just  before 
the  acute  stage  of  the  crisis,  the  national  bank-note  cir- 
culation stood  (on  October  15th)  at  #607,118,742.  While 
strenuous  efforts  were  made,  especially  by  some  of  the  large 
banks  in  New  York  and  Chicago,  to  comply  with  the  ex- 
pressed wishes  of  the  Department  and  of  the  Comptroller 
of  the  Currency  to  increase  circulation,  the  amount  out- 


252  PROGRESS  OF  THE   EMPIRE   STATE 

standing  had  risen  on  November  ist  only  to  $611,822,676, 
and  on  November  15th  to  $631,344,943.  The  most 
important  increase  in  the  circulation  took  place  after  the 
announcement,  about  to  be  referred  to,  of  the  government 
issues  of  Panama  bonds  and  one-year  Treasury  certificates, 
so  that  the  circulation  attained,  on  December  ist,  the 
amount  of  $656,218,196;  on  December  15th,  $676,914,235; 
and  finally,  on  December  31st,  $690,130,895.  By  the  latter 
date  the  urgent  pressure  for  currency  had  practically  ceased 
and  yet  notes  continued  to  be  issued  in  compliance  with 
orders  previously  received,  until  the  outstanding  circulation 
on  Saturday,  January  18,  1908,  was  $695,927,806. 

The  fact  that  the  national  banks  were  exerting  them- 
selves to  increase  circulation,  and  that  the  Treasury  by 
these  new  issues  placed  at  their  command  means  of  doing 
so,  undoubtedly  had  a  moral  effect  which  tended  still 
further  to  check  the  panic  and  reduce  the  premium  on 
currency.  The  banks  were  hampered,  however,  before 
the  announcement  of  the  new  government  issues,  by  the 
rapid  advance  in  the  price  of  2  per  cent,  bonds.  These 
bonds  sold  as  high  as  no,  and  even  at  this  price  the  supply 
in  the  market  obtainable  by  national  banks  was  extremely 
limited. 

It  was  with  a  view  to  relieving  this  situation,  and 
counteracting  the  premium  on  currency — which  was  itself 
a  stimulus  to  hoarding  and  which  practically  interrupted 
exchanges  between  different  cities — that  it  was  decided  on 
November  17th  to  receive  at  the  Treasury  applications  for 
subscriptions  for  $50,000,000  in  Panama  Canal  bonds, 
under  the  act  of  June  28,  1902,  and  $100,000,000  in  3  per 
cent,  certificates  of  indebtedness,  under  the  act  of  June  13, 
1898.  One  of  the  direct  effects  of  these  issues  was  to  afford 
to  the  banks  the  means  of  increasing  their  circulation.  If 
the  proceeds  of  these  issues  had  been  retained  in  entirety  in 


THE  CRISIS  OF  1907  253 

the  Treasury,  the  increase  in  bank  circulation  would  have 
been  offset  by  the  amount  paid  by  the  banks  for  the  bonds. 
By  providing,  however,  for  the  transfer  to  the  banks 
of  a  part  of  the  purchase  money  as  an  addition  to  their 
holdings  of  public  deposits  at  the  time,  a  very  considerable 
net  increase  in  circulation  became  possible. 

In  order  to  afford  this  relief,  the  banks  to  which  awards 
were  made  of  Panama  bonds  were  allowed  to  retain  90 
per  cent,  of  the  purchase  price  as  a  deposit,  and  those  to 
which  allotments  were  made  of  the  one-year  certificates 
were  allowed  to  retain  75  per  cent,  of  the  purchase  price. 
Thus  an  inducement  was  offered  for  subscriptions  to  the  new 
issues,  as  well  as  a  means  of  increasing  bank-note  circula- 
tion. It  was  with  deliberate  intent  also  that  the  offer  was 
made  more  attractive  in  the  case  of  the  bonds  than  in  the 
case  of  the  certificates,  after  it  became  evident  that  the 
issue  of  the  entire  amount  of  the  latter  first  proposed  would 
not  be  required  to  restore  confidence.  Ultimately  the 
results  of  these  offers  on  the  part  of  the  Treasury  were 
such  that  it  was  found  necessary  to  issue  only  $24,631,980 
in  the  Panama  bonds  and  $15,436,500  in  the  certificates 
of  indebtedness.  Practically  all  of  both  classes  of  obliga- 
tions, excepting  $91,820  in  bonds,  were  used  as  the  basis 
for  increasing  the  bank-note  circulation  or  securing  public 
deposits. 

The  issue  of  new  securities  by  the  Treasury  Depart- 
ment was  influenced  by  the  conclusion  that  it  was  advisable 
to  take  some  strong  and  resolute  step  which  would  convince 
the  public,  both  at  home  and  abroad,  that  the  Government 
was  thoroughly  alive  to  the  situation  and  determined  to 
give  its  aid  in  every  possible  legal  and  proper  form.  The 
most  potent  weapon  at  such  times  in  bringing  a  crisis  to 
an  end  is  often  as  much  one  of  moral  effect  as  of  the  definite 
action  taken.     It  has  been  the  history  of  many  great  crises 


254  PROGRESS  OF  THE   EMPIRE   STATE 

in  Europe  as  well  as  in  this  country  that  the  knowledge 
that  adequate  resources  existed  to  avert  disaster  was 
sufficient  to  obviate  the  necessity  for  employing  such 
resources  to  their  utmost  limit.  An  illustration  in  point 
is  the  action  of  the  Chancellor  of  the  Exchequer  in  Great 
Britain  in  the  panic  of  1866,  when  the  announcement  that 
he  had  authorized  the  Bank  of  England  to  disregard  the 
Bank  Act  and  to  issue  its  notes  to  any  necessary  limit 
promptly  arrested  pressure  upon  the  banks.  So  prompt 
was  the  response  of  public  feeling  to  this  action  in  suspend- 
ing the  demand  for  discounts  and  the  withdrawal  of  deposits 
that  the  bank  did  not  find  it  necessary  to  avail  itself  of  the 
authority  to  issue  additional  notes.  The  fear  that  accom- 
modation could  not  be  obtained  by  solvent  business  men 
was  completely  allayed  and  the  panic  almost  immediately 
subsided. 

The  fact  that  the  Treasury  was  in  a  strong  position  in 
respect  to  its  normal  cash  balance  made  the  situation  much 
more  easy  of  control  in  some  respects  than  after  the  panic 
of  1893,  when  the  cash  balance  was  almost  completely 
exhausted  and  the  reaction  of  this  influence  was  felt  in 
depleting  the  gold  reserve.  At  that  time  the  first  issue  of 
$50,000,000  in  5  per  cent,  bonds  was  not  announced  until 
the  cash  reserve  had  been  depleted  below  $50,000,000. 
And  the  same  depletion  took  place  before  the  second  issue 
of  bonds  in  the  autumn  of  1894. 

While  the  pressure  upon  the  banks  was  not  allayed  at 
once  by  this  measure,  confidence  was  so  far  restored  that 
the  premium  on  currency  fell  immediately,  and  bids  were 
received  in  such  volume  for  both  classes  of  issues  that  it 
was  not  considered  necessary  to  allot  even  half  of  the  total 
amount  of  the  two  issues. 

The  Panama  Canal  bonds  were  issued  under  authority 
of  the  act  of  June  28,  1902,  as  amended  by  the  act  of  De- 


THE  CRISIS  OF  1907  255 

cember  21,  1905,  authorizing  the  Secretary  of  the  Treasury, 
"To  borrow  on  the  credit  of  the  United  States  from  time 
to  time  as  the  proceeds  may  be  required  to  defray  expendi- 
tures authorized  by  this  act  (such  proceeds  when  received 
to  be  used  only  for  the  purpose  of  meeting  such  expendi- 
tures), the  sum  of  $130,000,000,  or  so  much  thereof  as  may 
be  necessary." 

It  would  seem  to  be  obvious  from  this  language  that  it 
was  intended  to  construct  the  canal  entirely  from  the  pro- 
ceeds of  loans  issued  for  the  purpose  and  not  to  charge  any 
part  of  the  cost  of  construction  upon  the  current  ordinary 
receipts  of  the  Government.  As  the  entire  proceeds  of 
the  bonds  which  were  actually  issued  under  this  offer, 
amounting  to  $24,631,980,  were  expended  on  the  canal 
work,  it  would  seem  that  no  question  of  the  legality  or 
propriety  of  such  an  issue  of  bonds  could  be  raised. 

The  one-year  certificates  were  issued  under  authority 
of  the  act  of  June  13,  1898,  authorizing  such  issues  when 
necessary  to  meet  the  expenses  of  the  Treasury.  The 
criticism  has  been  made  that  with  a  nominal  cash  balance 
of  some  $200,000,000  in  the  Treasury  the  occasion  contem- 
plated by  the  act  did  not  arise  and  the  power  therefore  did 
not  inhere  in  the  Secretary  to  make  an  issue  of  such 
securities  to  meet  current  expenses.  From  a  strictly  legal 
point  of  view,  there  is  probably  no  question  that  the  deter- 
mination of  the  occasion  for  making  such  an  issue  is  within 
the  discretion  of  the  Secretary  of  the  Treasury.  Indeed, 
it  is  expressly  made  so  by  the  statute.  From  a  financial 
point  of  view  the  Secretary  felt  justified  in  exercising  this 
discretion  with  due  regard  to  the  amount  of  cash  actually 
in  the  Treasury  as  well  as  to  the  amount  shown  upon  the 
balance  sheet,  including  deposits  in  national  banks.  It 
seemed  to  him  that  it  would  be  a  strained  construction  of 
the  act  of  1898,  and  of  his  official  responsibility,  to  hold 


256  PROGRESS  OF  THE   EMPIRE  STATE 

that  it  was  his  duty,  in  order  to  meet  the  current  needs  of 
the  Treasury,  to  invoke  a  financial  disaster  by  attempting 
to  withdraw  funds  on  deposit  with  national  banks  at  a 
time  when  they  were  subject  to  severe  strain  in  meeting 
the  business  requirements  of  the  country,  and  when  any 
additional  act  or  policy  tending  to  subject  them  to  further 
pressure  might  make  absolutely  impossible,  if  it  were  not 
already  so,  the  return  to  the  Treasury  of  the  funds  required 
for  meeting  its  obligations. 

The  character  of  the  new  issues  of  securities  offered  for 
subscription  was  such  that  it  was  anticipated  that  most  of 
the  subscriptions  would  come  from  national  banks.  The 
2  per  cent,  bonds  afford  such  privileges  to  national  banks  as 
a  basis  of  note  circulation  that  there  are  strong  inducements 
to  the  banks  to  outbid  private  investors,  who  would  find 
in  the  bonds  nothing  more  than  the  best  form  of  security 
paying  only  2  per  cent  per  annum.  It  was  expected — and 
this  expectation  was  fulfilled — that  the  bonds  would  be 
used  largely  as  a  basis  for  additional  bank-note  circulation 
and  that  such  circulation  would  contribute  its  share  to 
relieving  the  acute  pressure  for  currency  which  existed 
throughout  the  country.  Even  if  there  had  been  no  other 
justification  for  limiting  subscriptions  to  national  banks, 
this  consideration — that  the  bonds  would  be  used  to  meet 
the  pressure  for  currency — would,  in  the  opinion  of  the 
Department,  have  justified  an  absolute  restriction  of  the 
awards  to  national  banks. 

The  legal  right  of  the  Department  to  make  allotments 
of  the  bonds  and  securities  to  such  persons  and  banks  and 
in  such  amounts  as  it  might  see  fit  can  hardly  be  called  in 
question,  in  view  of  the  fact  that  reservations  on  these 
points  were  made  when  subscriptions  were  invited.  Thus 
the  circular  offering  the  Panama  bonds  contained  this 
distinct  provision:     "  The   Department  also   reserves   the 


CHARLES    COURTER   DICKINSON 

R"  '.skill,    N.    V.;    graduated     CobleskUl 

Acad 

',  bar, 
May   i".  [894,  al  Alban  or  oi    Dickinson   on    Eminent 

Domain,  Groesbeck  and  Dickinson's  Banking  York. 

Dickinson  ami  Cummings'  General  Municipal  Lines  of  New  York. 
Was  president  Delta  Tan  Delta  I- 
chairman   of   1;  [of    Direi  I 

'  w  v'"'k:  esident  and  dii 

:;l1  Trus<  '  acting 

ie   Trust   Co.,   for   which 
Leslie    M.    Shaw,   ex-Secretary   of 
it.      Made  tour  around  the  world,  1 
Mayflower  ,]    of 

Huguenot.  Socie  United  States,  Sons  of  the  Revolution, 

Cornell    Alumni  Metropolitan    Museum    of 

M"st'  :  the  Municipal  An  |  Mew 

.,  New  York   Botanical  Gar  1   (910. 


TIIF.  CRISIS  OF  1907  257 

right  to  reject  any  or  all  bids,  if  deemed  to  be  to  the  interests 
of  the  United  States  so  to  do." 

Obviously,  so  far  as  the  offer  of  securities  was  influenced 
by  the  desire  to  prevent  distress  in  the  money  market,  it 
would  have  failed  of  this  purpose  if  awards  had  been  made, 
even  to  bona  fide  bidders,  which  would  have  resulted  in  large 
drafts  upon  the  reserve  money  of  the  banks  and  would  not 
have  aided  in  drawing  money  from  private  hoards.  After 
careful  analysis  of  the  bids  received,  the  conclusion  was 
reached  by  the  Department  that  if  bids  were  awarded  to 
individuals  in  large  sums,  it  would  have  the  tendency  to 
cause  still  further  withdrawals  of  money  from  the  savings 
banks,  which  usually  carry  relatively  small  reserves  in 
currency  and  in  case  of  heavy  demands  would  have  been 
compelled  to  draw  upon  the  national  banks  and  trust 
companies.  It  was,  therefore,  decided  in  the  case  of  the 
Panama  bonds  to  make  no  awards  to  individuals  in  excess 
of  #10,000.  It  was  also  decided  to  accept  the  highest  bids 
of  national  banks  for  the  remainder  of  the  issue,  after  these 
minimum  allotments  to  individuals. 

At  no  stage  of  the  crisis  did  the  Government  feel  called 
upon  to  interfere  directly  with  the  normal  movement  of 
gold  between  international  markets.  The  movement  of 
foreign  exchange  was  very  irregular  in  the  early  stages  of  the 
crisis,  because  of  some  demand  for  remittances  to  London 
in  settlement  for  maturing  finance  bills  and  in  payment  for 
American  securities  which  were  being  remitted  by  disturbed 
foreign  holders  to  the  United  States.  The  sum  of  #1,500,000 
in  gold  was  actually  engaged  for  export  to  Germany  on  Octo- 
ber 19th,  but  was  explained  as  being  a  special  transaction. 

After  a  short  period  of  uncertainty,  however,  exchange 

turned  strongly  in  favor  of  imports  of  gold  into  the  United 

States,  and  by  the  end  of  October  engagements  of  over 

#24,000,000  were  announced,  which  were  eventually  swelled 
17 


258  PROGRESS  OF  THE   EMPIRE   STATE 

during  the  next  two  months  to  more  than  #100,000,000. 
None  of  this  gold  arrived  until  November,  but  the  moral 
effect  of  the  engagements  was  felt  as  soon  as  they  were 
announced.  The  metal  was  distributed,  chiefly  through 
the  channel  of  the  New  York  clearing-house  banks,  to 
threatened  points  throughout  the  country.  It  is  a  striking 
proof  of  the  energy  with  which  the  banks  of  New  York 
extended  aid  to  those  of  other  parts  of  the  country  that  the 
national  bank  returns  show  a  reduction  in  specie  in  the 
national  banks  of  New  York  from  #173,221,007  on  August 
22,  1907,  to  #147,974,918  on  December  3,  1907.  Thus, 
not  only  did  the  entire  volume  of  gold  imported  between 
these  two  dates  pass  through  New  York  to  other  places, 
except  so  far  as  a  part  was  hoarded  by  individuals,  but  the 
New  York  banks  gave  up  #25,000,000  of  their  usual  and 
normal  reserves. 

These  various  relief  measures  marked  the  turning-point 
of  the  panic.  The  deficit  in  the  reserves  of  the  New  York 
clearing-house  banks  w  hich  on  November  16th  was  #53,666,- 
950,  increased  in  the  next  week  less  than  #500,000,  and  in  the 
following  weeks  turned  rapidly  downward,  until  the  amount 
on  December  28,  1907,  was  only  #20,170,350,  and  by 
January  18,  1908,  had  been  converted  into  a  surplus  of 
#22,635,475.  The  cash  holdings  of  these  banks,  which  had 
touched  a  minimum  on  November  23,  1907,  of  #215,851,100 
rose  on  January  18,  1908,  to  #295,182,600.  No  further 
steps  were  considered  necessary  by  the  Treasury  except 
to  continue  deposits  in  the  banks  of  public  moneys  where 
they  were  available,  and  early  in  December  it  became 
possible  to  replenish  the  cash  in  the  Treasury  by  the  with- 
drawal of  about  #6,000,000  from  national  banks  in  New 
York  City.  The  premium  on  currency  did  not  wholly 
disappear  until  about  the  beginning  of  the  new  year,  but 
remained  only  nominal  during  the  latter  part  of  December 


I  I  Hi  CRISIS  OF  1907  259 

as  the  panic  subsided  and  as  the    funds  withdrawn  from 
banks  for  hoarding  were  gradually  restored. 

In  Europe,  also,  conditions  began  to  improve  rapidly 
with  the  passing  of  the  crisis  in  America.  The  percentage 
of  the  reserve  at  the  Bank  of  England  rose  from  35.62  per 
cent,  on  January  2,  1908, 1052.69  percent,  on  January  16th, 
and  the  directors  felt  justified  in  reducing  the  official 
discount  rate  from  7  per  cent,  to  6  per  cent,  on  January  2nd, 
and  two  weeks  later  (on  January  16th)  to  5  per  cent.  The 
gold  stock  of  the  bank,  which  had  been  reduced  on  November 
7th  to  £27,725,225,  rose  on  January  2,  1908,  to  £32,543,666, 
and  on  January  16th,  to  £35,791,425.  The  Imperial  Bank 
ot  ( Jermany,  which  had  been  under  severe  pressure,  benefited 
by  an  increase  in  its  cash  by  #20,000,000  in  the  single  week 
of  January  17th,  and  a  decrease  in  its  note  issue  by  #43,875,- 
000,  and  under  these  conditions  felt  justified  in  reducing  its 
discount  rate  from  7^  to  6l/>  per  cent.,  and  later  (on 
January  25th)  to  6  per  cent.  The  Bank  of  France  also 
greatly  increased  its  cash  resources  and  reduced  its  discount 
rate  early  in  the  year. 


THE  NEW  YORK  STOCK  EXCHANGE 

present  New  York  Stock  Exchange  building,  which  in 
architectural  beauty  is  the  foremost  bourse  in  the  world,  was 
completed  in  April,  1903.  It  is  an  eight-story,  steel-cage,'  fire- 
proof structure  of  the  Roman  Renaissance  type.  The  main 
structure  is  approximately  rectangular,  about  150  feet  deep,  with 
fronts  on  Broad  and  New  Streets,  respi 

wide.     An  irregular  extension  about  84  feet  long,  with  a  15-foot 
front,  affords  an  entrance  on  Wall  Street.     The  materials  1 
construction  are   wholly   American,   tl  ng  of 

Georgia  marble  aad  the  interior  of  marble  from  South  Dover, 
N.  Y.  Within  the  Board  Room  proper  there  are  neither  columns 
nor  supports;  the  effect  is  that  of  a  majestic  hall  with  noble 
surfaces  of  marble  walls,  crowned  by  an  ornate  ceiling.  George 
P.  Post  was  the  architect,  and  Charles  T.  Wills  the  builder. 


CHAPTER  VIII 

HISTORY  OF  THE  NEW  YORK  STOCK 
EXCHANGE 

BY  SERENO  S.  PRATT 

MUCH  might  be  written  concerning  the  close  re- 
lation between  war  and  the  origin  of  stock 
markets.  War  is  not  merely  a  question  of  men 
and  guns.  It  is  likewise  a  question  of  finance.  While 
destructive  of  wealth  it  calls  for  extraordinary  government 
expenditures  which  impart  a  temporary  activity  to  many 
industries.  It  results  in  an  extension  of  government  credit. 
These  things  lead  to  inflation  and  speculation. 

War  creates  national  debts.  National  debts  make 
necessary  certificates  representing  this  indebtedness.  These 
certificates  pass  into  the  hands  of  investors  through  stock 
markets  and  stock  exchanges.  Thus  the  history  of  stock 
markets  is  closely  interwoven  with  the  history  of  govern- 
ments. The  national  indebtedness  created  by  Louis  XIV. 
gave  rise  to  John  Law's  bank,  the  Mississippi  Bubble, 
and  the  beginnings  of  the  Paris  stock  market.  The  national 
indebtedness  created  by  the  wars  of  the  seventeenth  century 
gave  rise  to  the  Bank  of  England  and  the  beginnings  of  the 
London  stock  market.  ' 

It  was  war  likewise  that  gave  birth  to  the  New  York 
stock  market,   the   history  of  which   starts   directly  and 

in  the  same  place  from  the  organization  of  independent 

261 


262  PROGRESS  OF  THE   EMPIRE   STATE 

constitutional  government  in  the  United  States.  In  New 
York  and  in  Wall  Street,  where  Washington  was  inaugurated 
in  1789  and  where  the  First  Congress  assembled,  started  the 
stock  market  which  sprang  as  did  the  stock  markets  of 
Paris  and  London,  out  of  the  debt  burdens  of  war.  William 
M.  Gouge,  writing  in  1837,  said:  "The  period  immediately 
succeeding  the  Revolutionary  War  was  in  a  peculiar  sense  an 
age  of  speculation. " 

The  contest  of  the  colonies  for  independence  created  a 
mass  of  indebtedness,  continental  and  colonial,  aggregating 
about  #80,000,000.  The  First  Congress  established  a  treas- 
ury department.  Washington  appointed  Hamilton  as 
Secretary  of  the  Treasury  and  Hamilton's  first  great  act  as 
Secretary  was  to  report  to  Congress  in  favor  of  the  assumption 
by  the  new  government  of  the  debts  incurred  in  the  conduct 
of  the  War  of  the  Revolution.  This  report,  presented  in 
January,  1790,  started  the  first  stock  speculation  on  this 
continent.  "Eager  speculators,"  says  Lodge  in  his 
Alexander  Hamilton,  "hurried  over  the  country  to  buy  up  the 
debts,  and  the  Secretary  of  the  Treasury  already  began  to  be 
regarded  as  one  who  could  make  the  fortune,  not  only  of 
the  government,  but  of  individuals."  The  certificates  of 
indebtedness  bought  from  the  original  holders  at  low  prices 
advanced  rapidly  to  high  figures.  The  plan  of  refunding 
the  debt  was  bitterly  opposed  by  Hamilton's  enemies  on  the 
ground  that  greedy  and  successful  speculators  were  to 
profit  at  the  expense  of  the  original  holders,  the  men  who 
had  in  the  perils  of  war  actually  loaned  their  money  to  the 
struggling  colonies.  Even  Hamilton  was  not  spared  from 
personal  abuse,  but  was  charged  with  having  aided  in  and 
profited  by  this  speculation.  In  a  subsequent  Congressional 
inquiry  he  was  completely  vindicated. 

It  was  Hamilton  also  who  planned  the  first  United  States 
Bank,  the  organization  of  which  in  1791  produced  another 


HISTORY  01     INI    NEW  YORK  STOCK  EXCHANGE     263 

medium  of  speculation.  This,  we  are  told,  "expanded  into 
a  wild  mania  and  consequent  panic  and  disaster."  Hamil- 
ton had  already  some  years  before  assisted  in  the  establish- 
ment of  the  Bank  of  New  York,  the  first  institution  of  the 
kind  in  New  York  City.  In  1 791,  "hearing  with  infinite 
pain  of  the  circumstance  of  a  new  hank"  (in  opposition  to 
the  United  States  Bank  and  the  Bank  of  New  York), 
Secretary  Hamilton  wrote: 

'These  extravagant  sellers  of  stocks  do  injury  to  the 
government  and  to  the  whole  system  of  public  credit  by  dis- 
gusting all  sober  citizens  and  giving  a  wild  air  to  every  thing." 

The  speculative  mania,  as  speculative  manias  usually 
do,  resulted  in  collapse  and  loss.  In  1791  United  States 
Bank  stock  declined  from  195  to  no,  rallying  later  to  145. 
This  caused  a  number  of  failures  and  the  distress  was  so 
great  that  Hamilton  resorted  to  the  expedient  of  buying 
government  bonds  so  as  to  get  out  more  money  in  the  market, 
a  device  which  he  had  to  repeat  in  the  following  year.  The 
cashier  of  the  Bank  of  New  York,  in  a  report  to  Secretary 
Hamilton,  March  25,  1792,  said: 

"We  have  no  public  sales  of  stocks  now  in  the  evenings. 
Therefore  I  cannot  go  into  the  market  until  to-morrow. 
.  .  .  The  large  dealers  in  stocks  are  to  have  a  meeting  this 
evening  and  it  is  reported  will  enter  into  an  absolute  agree- 
ment not  to  draw  any  specie  from  the  banks  for  three 
months  to  come." 

All  this  is  of  interest  as  it  is  a  contemporary  reference 
to  the  infant  stock  market  and  also  to  a  measure  of  relief 
for  an  overburdened  credit  situation  by  the  first  Secretary 
of  the  Treasury  which  his  successors  have  more  than  once 
been  obliged  to  repeat. 

In  the  very  month  that  the  cashier  of  the  Bank  of  New 
York  wrote  this  letter  to  Hamilton,  it  was  recorded  in  the 
public  press  that  "the  stock  exchange  office  is  open  at  22 


264  PROGRESS  OF  THE   EMPIRE   STATE 

Wall  Street  for  the  accommodation  of  the  dealers  in  stocks 
and  in  which  public  sales  will  be  held  daily  at  noon."  This 
would  appear  to  have  been  an  auctioneer's  organization. 
But  there  were  even  then  brokers  in  stocks  independent 
of  the  auctioneers  and  these  on  March  21st  held  a  meet- 
ing at  Corre's  Hotel  at  which  they  agreed  not  to  attend  the 
auction  sales  and  appointed  a  committee  to  make  suitable 
arrangements  and  regulations  for  the  transaction  of  their 
business. 

This  meeting  was  the  beginning  of  a  regulated  stock 
market  in  New  York.  On  May  17,  1792,  the  brokers, 
seventeen  in  number,  three  of  whom  had  offices  in  Wall 
Street,  four  in  Broad  Street,  and  the  rest  in  adjacent  streets, 
signed  the  following  agreement: 

"We,  the  subscribers,  brokers  for  the  purchase  and  sale 
of  public  stock,  do  hereby  solemnly  promise  and  pledge 
ourselves  to  each  other,  that  we  will  not  buy  or  sell  from  this 
day,  for  any  person  whatsoever,  any  kind  of  public  stock  at 
a  less  rate  than  one  quarter  per  cent,  commission  on  the 
specie  value,  and  that  we  will  give  a  preference  to  each  other 
in  our  negotiations.  In  testimony  whereof  we  have  set  our 
hands  this  17th  day  of  May,  at  New  York,  1792." 

It  may  have  been  accident  or  destiny  that  willed  that 
the  stock  market  should  have  been  located  in  Wall  Street, 
but  there  is  nothing  accidental  in  its  evolution.  I  have 
connected  its  origin  with  the  War  of  the  Revolution  because 
that  war  resulted  in  the  creation  of  securities  to  be  bought 
and  sold.  While  war  creates  a  supply  of  marketable  securi- 
ties and  stimulates  speculation,  it  is  no  explanation  of  the 
mystery  of  the  development  of  a  demand  for  securities 
whether  these  securities  be  the  outcome  of  destructive 
wars  or  of  the  constructive  enterprises  of  peace.  We 
must  go  back  farther  than  the  American  Revolution  or 
even    the  wars  of  the    seventeenth    century    to    account 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     265 

for  the  evolution  of  stocks,  of  stock  markets,  and  of  stock 
exchanges. 

This  evolution  has  developed  naturally  out  of  economic 
laws.  The  stock  market  has  grown  out  of  human  needs  as 
legitimately  as  the  establishment  of  representative  govern- 
ment itself.  The  modern  financial  system  is  indeed  syn- 
chronous with  modern  liberty.  Both  are  closely  allied  in 
spirit,  in  origin,  and  in  evolution.  The  expansion  of  indi- 
vidual liberty  has  carried  with  it  the  expansion  of  commercial 
enterprise.  Commercial  enterprise  required  new  tools 
with  which  to  explore  and  develop  the  wealth  of  the  earth. 
Science  rushed  to  its  aid  with  wonderful  inventions  which 
have  revolutionized  the  conditions  of  human  life,  but  even 
as  much  as  steam  and  electricity  have  modern  credit  and 
the  modern  corporation  proved  the  most  powerful  instru- 
ments of  commercial  enterprise.  No  one  studying  closely 
the  history  of  the  development  of  this  continent  can  fail  to 
appreciate,  in  part  at  least,  the  fact  that  without  the  stimu- 
lating influence  and  dynamic  power  of  banking  credit, 
corporate  capital,  and  the  stock  market,  it  would  have  been 
impossible  to  have  brought  this  country  to  its  present  state 
of  wealth  and  power.  Credit  and  the  stock  market  have 
accomplished  in  one  hundred  years  what  it  would  otherwise 
have  taken  perhaps  five  hundred  years  to  accomplish. 

The  steps  in  the  development  of  the  stock  market  are 
easy  to  trace.  It  was  found  that  individual  resources  were 
insufficient  to  supply  the  capital  required  to  carry  on  the 
large  enterprises  which  the  new  needs  of  the  world  required, 
especially  after  the  discovery  of  America.  The  modern 
corporation  sprang  out  of  this  necessity.  It  was  found  that 
by  aggregating  the  means  of  many  small  capitalists  the 
money  could  be  secured  to  carry  on  the  large  enterprises. 
Just  as  in  the  domain  of  politics  it  was  found  that  by  unit- 
ing the  many  under  a  form  of  government  which  joined  the 


266  PROGRESS  OF  THE   EMPIRE   STATE 

principles  of  union  and  liberty,  with  a  strong  central  execu- 
tive and  a  representative  assembly,  so  in  the  domain  of 
business  it  was  found  that  by  means  of  the  corporation  it 
was  possible  to  secure  the  power  of  united  capital  and  at  the 
same  time  retain  the  advantages  of  individual  liberty.  This 
was  not  indeed  all  thought  out  in  the  beginning.  It  simply 
grew,  as  all  mighty  movements  do,  out  of  the  operation  of 
the  law  of  supply  and  demand. 

The  capital  of  many  invested  in  the  corporation  was 
represented  by  shares,  and  it  was  soon  found  convenient 
that  these  shares  should  be  equal  in  value  but  that  each 
investor  or  partner  in  the  enterprise  might  own  as  many  of 
these  equal  shares  as  he  had  the  means  to  buy.  From  this 
developed  the  transferable  certificate  of  shares  of  stock 
so  that  partnership  interest  in  the  corporations  could  be 
more  easily  bought  or  sold  and  transferred  from  one 
owner  to  another.  Out  of  this  has  developed  the 
modern  stock  company,  which  facilitates  the  gathering, 
out  of  the  small  means  of  many,  the  capital  adequate  for 
undertakings  too  large  for  any  one  individual;  which 
permits  of  limited  liability,  so  that  a  maximum  of  power 
is  joined  to  a  minimum  of  individual  risk;  and  which  secures 
continuity  to  a  corporation  not  depending  upon  the  life  of 
any  one  stockholder,  but  existing  like  a  self-perpetuating 
body. 

Out  of  the  stock  company  has,  by  an  inevitable  evolu- 
tion, sprung  the  stock  market.  With  many  people  owning 
shares  in  stock  companies,  it  was  of  course  inevitable  that 
some  would  want  to  sell  their  interest  while  others  would 
want  to  buy.  Just  as  inevitably  there  developed  a  class 
of  middlemen  or  brokers  between  these  sellers  and  buyers. 
The  brokers  had  to  have  a  common  meeting-place  where 
they  exchanged  their  wares.  Such  a  meeting-place  became 
a  stock  market.     As  this  stock  market  developed  it  was 


/?, 


r~ 


*- 


RUSSELL  SAGE 

rona,N.Y.f  August  4,1816.  Began  his 
'■  as  an  errand  boy  in  his  brother's  grocery  store  at  Troy- 
rapidly  advanced  until  ie  a  wholesale  grocer  in 

,n  t837-  *man  of  Troy  ix47:  member  of  Congress 

,   S"!,H7'  active 

m   A  all  Street.     Was  director  in  a  large  nun  ^orations 

mdudmg  the  Manhattan  Raih  h 

aue  Bank,  ConsoUd  entra] 

;r,Wa>'.<  liri  P;"'^'  Railwa  1   Pacific   Mail 

I   DHvia  Slocum,  of  Syracuse 
,       *  -  who  survives  bin,,  an  m  his  largo  fortune  was 

bequeathed.     Since   the   death   of  her  husband    Mrs.   Sag 

many  other  public  benefactions,  has  es  [  m'  his 

.  >ry,  with  an  endowment  of  $10,000,000,  the  "Russell  Sage 
Foundation,"  for  the  Improvement  of  Social  and  Living  Condi- 
tions in  the  United  States.  Mr.  Sage  died  at  Lawrence,  Long 
Island,  July  22,  1906. 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     267 

found  necessary  to  organize  it  with  rules  and  regulations, 
and  thus  the  stock  exchange  came  into  existence.  Macau- 
l.i\.  in  a  celebrated  passage,  has  described  the  origin  of  the 
English  stock  market.  The  surplus  income  of  the  people, 
he  explained,  demanded  some  new  opportunity  for  invest- 
ment other  than  in  land,  for  the  supply  of  capital  seeking 
investment  was  greater  than  the  demand  for  it  in  agricul- 
ture. Hence  set  in  an  eager  buying  of  stocks  in  commercial 
corporations.  All  this  was  absolutely  legitimate,  but  out 
of  this  demand  for  stock  investments  developed  some  gross 
abuses,  such  as  fraudulent  promotion  and  dangerous  over- 
trading, leading  to  panic  and  loss.  This  has  not,  however, 
in  the  least  impaired  the  legitimate  foundation  of  the  stock 
exchange,  which  rests  upon  the  sound  basis  of  human  need. 
It  exists  because  it  is  necessary  for  the  world's  progress  in 
civilization.  It  is  difficult  in  this  day  to  conceive  what  the 
world  would  be  without  the  corporation  and  the  stock 
market.  It  is  certain  that  without  them  the  United  States 
of  America  would  not  now  be  one  of  the  three  or  four  great 
powers  of  the  earth. 

Stock  markets  are  products  of  civilization,  and  are 
to  be  found  in  their  most  highly  developed  state  in 
those  countries  which  are  richest  in  liquid  capital  seeking 
permanent  investment.  The  early  growth  of  the  New 
York  stock  market  was  slow,  as  was  to  be  expected  in  a 
new  country  with  limited  capital,  immense  as  were  its 
undeveloped  resources. 

For  twenty-five  years  the  New  York  stock  market  was 
conducted  substantially  under  the  agreement  of  May  17, 
1792,  for  it  was  not  until  1817  that  the  New  York  Stock 
Exchange  was  founded.  Although  there  were  seventeen 
brokers  in  this  agreement  of  1792,  there  were  only  seven 
stocks  to  deal  in,  as  is  shown  by  the  following  price-list  of 
May  26,  1792: 


268  PROGRESS  OF  THE   EMPIRE   STATE 

Six  per  cents 22s  od 

Three  per  cents 12s  8d 

Deferred 13s  2d 

Indents 12s  3d 

Final  settlements 18s  6d 

Half  shares  Bank  U.  S 50  per  cent,  premium 

Shares  Bank  of  N.  A.  (Phila.) ...  15  per  cent,  premium 

Mr.  Francis  L.  Eames,1  to  whom  the  Stock  Exchange 
is  much  indebted  for  most  of  the  few  records  of  its  early 
history,  gives  copies  of  curious  entries  in  the  books  of  one 
of  the  brokers  of  1792  in  which  accounts  are  made  not  only 
of  transactions  in  stocks  but  also  of  election  bets. 

It  is  a  remarkable  fact  that  stock  markets  are  waifs  of 
the  street.  What  is  known  as  the  Mississippi  Bubble  was 
a  speculation  in  shares  of  the  so-called  Mississippi  Company 
which  was  carried  on  in  the  Rue  Quincampoix.  For  a 
century  the  stock  market  of  London  was  located  on  the 
curbs  and  in  the  coffee  houses  of  Change  Alley.  Likewise 
the  earliest  New  York  market  was  conducted  under  a 
buttonwood  tree  in  front  of  68  and  70  Wall  Street.  There 
has  scarcely  been  a  time  since  then  when  part  of  the  stock 
market  was  not  located  in  the  street.  In  1792  accommoda- 
tions were  obtained  by  the  brokers  in  the  Tontine  Coffee 
House,  for  many  years  the  center  of  the  commercial  activi- 
ties of  New  York.  The  merchants,  rather  than  the  bankers 
or  brokers,  were  the  business  leaders  of  that  time.  Nearly 
half  a  century  before,  the  merchants  had  established  a  place 
of  meeting  in  Broad  Street,  and  in  1768,  in  the  long  room  of 
the  Fraunces' Tavern,  they  organized  the  Chamber  of  Com- 
merce. But  from  1793  to  1827,  when  the  Merchants'  Ex- 
change was  completed  on  the  site  of  the  old  Custom  House 
Building,  they  centered  in  the  Tontine  Coffee  House. 

1  The  New  York  Stock  Exchange,  by  Francis  L.  Eames,  1894. 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE    269 

Very  little  is  known  concerning  the  New  York  stock 
market  during  the  first  twenty-five  years  of  its  development. 
There  was  a  remarkable  growth  of  the  country  during  those 
years  and  investment  and  speculation  in  stocks  slowly  but 
surely  grew  with  it.  At  first,  as  has  been  related,  the  trad- 
ing was  in  government  securities.  Then,  and  for  a  long 
time,  bank  shares  were  the  leading  object  of  investment 
interests.  The  first  banks  proved  profitable  enterprises 
and  capital  was  rapidly  drawn  into  that  field.  In  nine 
years  the  number  of  banks  increased  from  three  to  twenty- 
three,  the  latter  having  a  capital  of  #33,000,000.  Insur- 
ance companies  were  also  started  and  the  shares  of  these 
came  into  the  market.  After  this,  canal  stocks  and  the 
shares  of  development  and  industrial  companies  began  to 
be  traded  in.  It  was  not  until  the  nineteenth  century  was 
thirty  years  old  that  railroad  stocks,  which  have  ever  since 
been  the  leaders  in  the  market,  first  appeared.  In  1801 
a  stock  list  advertised  by  a  broker  whose  offices  were  at 
50  Wall  Street  contained  the  names  of  five  government 
stocks,  three  bank  stocks,  and  three  insurance  stocks.  It 
is  noteworthy  that  every  one  of  the  bank  and  insurance 
stocks  sold  at  par  or  more. 

It  must  be  remembered  that  at  this  time  the  country  was 
still  in  a  primitive  state,  and  so  limited  were  the  facilities 
of  transportation  that  prayers  were  offered  in  the  churches 
for  those  about  to  make  the  journey  between  New  York 
and  Boston.  Wall  Street,  as  its  name  indicates,  was  the 
outer  stockade  or  wall  of  the  original  settlement  of  Man- 
hattan Island.  In  the  latter  half  of  the  eighteenth  century 
trade  had  already  invaded  the  lower  half  of  the  street,  but 
the  church  then,  as  now,  held  sway  at  its  Broadway  entrance, 
while  some  of  the  best  society  in  the  city  resided  between 
Broadway  and  William  Street.  Almost  from  the  very 
start  the  banks  and  corporations  and  the  brokers  began  to 


270  PROGRESS  OF  THE   EMPIRE   STATE 

claim  the  street  as  their  own,  and  at  the  beginning  of  the 
nineteenth  century  it  was  as  truly  the  financial  center  of 
the  city  as  it  is  now,  although  it  was  not  until  a  generation 
later  that,  New  York  forging  ahead  of  Philadelphia,  it 
became  the  financial  leader  of  America. 

To-day  if  the  question  were  asked,  what  is  the  most 
famous  thoroughfare  in  America,  the  answer  would  have  to 
be,  not  Broadway  or  Pennsylvania  Avenue,  but  Wall  Street. 
Certainly  no  other  street  contributes  so  much  to  the  glory, 
the  wealth,  and  the  power  of  the  Empire  State.  The  State 
derived  a  revenue  in  1906  of  #6,800,000  by  its  taxes  on  the 
stock  transfers  of  the  street,  but  it  might  well  pay  even  a 
larger  sum  than  that  to  prevent  the  business  of  the  street 
from  diversion  to  another  State.  Without  Wall  Street, 
New  York  would  still,  no  doubt,  be  an  important  State, 
but  she  would  not  possess  that  which  now  most  distinguishes 
her  from  all  other  political  divisions  of  the  Federal  Union, 
namely,  financial  power. 

The  stock  market  continued  without  a  name  or  formal 
organization  until  181 7,  when  it  was  finally  transformed  into 
a  stock  exchange.  Philadelphia,  and  not  New  York,  has 
the  distinction  of  having  founded  the  first  bank  and  the 
first  stock  exchange  in  America,  and  it  was  from  Phila- 
delphia that  the  New  York  brokers  obtained  ideas  for  their 
own  constitution  and  by-laws.  There  seems  to  have  been  not 
a  little  business  in  stocks  between  the  two  cities  in  these 
early  years,  and  it  would  appear  that  wide-awake  brokers 
were  able  to  pick  up  arbitrage  profits.  I  find  in  an  old 
publication  a  statement  that  "  about  1818  the  Southern 
mail  was  detained  at  Powles  Hook  nearly  two  hours  to  enable 
certain  speculators  to  reach  Philadelphia  and  make  their 
purchases  before  the  arrival  of  the  news  contained  in  the 
mail."     Medbury,1  in  a  book  on  Wall  Street  in  1870,  gives 

1  Men  and  Mysteries  of  Wall  Street,  by  James  K.  Medbury,  1870. 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     271 

what  is  evidently  another  version  of  the  same  incident,  al- 
though he  places  it  sometime  prior  to  the  organization  of  the 
exchange.  He  relates  that  important  news  having  arrived 
from  London,  causing  a  rise  in  stocks,  three  smart  New  York 
brokers  took  the  coach  for  Philadelphia.  By  connivance 
with  the  driver  the  coach  broke  down  at  Powles  Hook  and 
the  three  brokers  hired  a  post  chaise  and  drove  full  speed  to 
Philadelphia  where,  in  advance  of  the  mail  containing  the 
news,  they  were  able  to  buy  the  stocks  at  lower  prices  than 
those  prevailing  in  New  York.  The  same  "enterprise" 
was  displayed  by  Rothschild  who,  witnessing  the  Battle  of 
Waterloo,  managed  to  get  to  London  ahead  of  the  news 
and  reaped  a  fortune  out  of  his  exclusive  information.  Prob- 
ably these  New  York  brokers  got  the  inspiration  for  their 
Philadelphia  coup  from  Rothschild's  Waterloo  "scoop." 

No  copy  of  the  constitution  of  18 17  exists,  although  there 
are  some  records  of  the  transactions  of  the  first  exchange, 
and  it  is  recorded  that,  for  a  brief  session  during  the  preva- 
lence of  yellow  fever,  it  was  compelled  to  hold  its  sessions 
at  Washington  Hall  on  the  corner  of  Reade  Street.  In 
November,  1819,  a  committee  composed  of  W.  H.  Robinson, 
F.  A.  Tracy,  R.  H.  Nevins,  L.  Loomis,  and  Nathaniel  Prime 
was  appointed  to  revise  the  constitution.  On  February 
21,  1820,  this  new  constitution  went  into  operation.  Under 
it  the  title  given  to  the  association  was  the  New  York  Stock 
and  Exchange  Board.  It  was  provided  that  no  one  could 
be  eligible  for  membership  who  had  not  been  a  broker  one 
year  or  an  apprentice  or  clerk  to  a  broker  for  two  years. 
The  entrance  fee  was  $25.  The  president  presided  and 
called  the  roll  of  stocks,  the  secretary  recording  the  transac- 
tions. The  rates  of  commission  as  fixed  by  the  constitution 
were  one  quarter  per  cent,  on  funded  debt,  insurance,  bank 
and  other  stocks,  bills  of  exchange  and  specie;  one  half  per 
cent,  for  cashing  promissory  notes  and  acceptances,  and  one 


2*]2  PROGRESS  OF  THE   EMPIRE   STATE 

per  cent,  for  obtaining  money  on  mortgages.  Brokers  were 
held  liable  unless  they  could  surrender  principals  who  would 
be  considered  responsible.  In  time  bargains,  principals  had 
to  be  surrendered  before  I  p.m.  of  day  of  contract  and  the 
other  party  had  until  5  p.m.  for  consideration.  If  the  prin- 
cipal was  not  acceptable  the  bargain  was  held  to  be  void. 
No  fictitious  sale  was  permitted  under  penalty  of  expulsion. 
A  member  failing  in  his  contracts  was  suspended.  A  vote 
of  two  thirds  of  his  fellow-members  could  reinstate  him 
except  in  case  his  failure  was  caused  by  his  own  speculation, 
when  he  could  not  be  reinstated  until  all  his  engagements 
were  settled.  In  time  bargains,  interest  was  fixed  at  7 
per  cent.  Leaving  the  board  room  during  the  calling  of 
stocks,  indecorous  language  and  conduct,  were  punished  by 
fines  or  suspension.  In  some  of  these  provisions  are  to  be 
found  the  germs  of  the  system  prevailing  to-day  on  the 
Stock  Exchange.  The  membership  of  the  board  at  the 
time  this  constitution  was  adopted  was  thirty-nine.  The 
president  was  G.  S.  Mumford  and  among  the  members  were 
Nathaniel  Prime  and  John  Ward,  who  appeared  from  all 
accounts  to  be  the  leaders  in  the  street. 

As  the  War  of  the  Revolution  led  to  the  starting  of  the 
stock  market,  so  the  War  of  1812  may  be  said  to  have  led 
to  the  organization  of  the  stock  market  into  the  stock 
exchange,  for  this  second  war  with  England  resulted  in  a 
new  output  of  securities,  new  inflation,  new  starting  of 
enterprises.  From  1812  to  1816  the  government  issued  over 
$80,000,000  of  new  loans,  although  the  Treasury  received 
only  $34,000,000  from  them  as  measured  in  specie.  During 
the  same  time  the  number  of  banks  increased  from  88  to  246 
and  the  note  circulation  from  $45,000,000  to  $100,000,000. 
The  new  loans  and  the  stock  of  the  new  banks  added  to  the 
material  out  of  which  investment  and  speculation  were  made, 
and  it  is  not  surprising  therefore  that  action  had  to  be  taken 


■ 


fA/yy^c^- 


HENRY  CLAY  PIERCE 

Financier;  born  at  St.  Lawrence,  Jefferson  County,  X.  Y.;  son 

Dr.  Dyer  Ensworth  and  Mary  Jane  (Ackcrt  lucated  in 

Jefferson   County    High   School.     Chairman   New  York  Board 
National  Railways  of  Mexico;  chairman  and  director  Waters- 
Pierce  Oil  Co.  (St.  Louis),  Pierce  Fordyce  Oil  Assoc.   (Texas), 
e  Oil  Corj'  lexican  Central  Railway  Co.,  Tennessee 

Central  Railroad  Co.  (Nashville);  president  and  director  Pierce 
Investment  Trust  Co.  (St.  Louis);  director  B.  &  O.  Southwestern 
Railroad  Co.,  Seaboard  Air  Line  Railway,  Mexican  Pacific 
Railway  Co.,  Central  Mexico  Railroad  Co.,  Tennessee  Construc- 
tion Co.  (St.  Louis),  Mexican-American  Steamship  Co.,  Mexican 
National  Construction  Co.,  Tampico  Harbor  Co.,  Brier  Hill 
ishville),  International  Banking  Corporation 
(New  York),  National  Bank  of  Commerce,  Mississippi  Valley 
Trust  Co.,  American  Central  Insurance  Co.  (St.  Louis),  Bank  of 
Commerce  and  Industry  (City  of  Mexico),  Mercantile  Fire  & 
Marine  Insurance  Co.  (Boston),  and  Mexican  Fuel  Co.  (City  of 
Mexico). 


I  lis  loin   <>!•    Mil    NKW  YORK  STOCK  EXCHANGE     273 


to  give  regular  organization  to  the  stock  market.  The 
records  of  the  Stock  Exchange  show  that  in  November, 
1818,  there  were  quotations  of  seven  government  stocks, 
ten  bank  stocks,  and  thirteen  insurance  stocks. 

In  1820,  the  very  year  of  the  amended  constitution 
already  outlined,  Wall  Street  began  to  figure  a  little  in  the 
press,  and  one  of  the  newspapers,  with  much  of  the  same 
editorial  virtue  displayed  to-day  in  treating  of  the  stock 
market,  commented  upon  "the  progress  of  stock  gambling." 
It  appears  that  there  was  talk  of  a  corner  in  United  States 
Bank  stock  and  the  shorts  were  frightened  into  covering. 
This  early  trading,  it  should  be  remembered,  was  without 
the  facilities  which  now  bind  the  world  together.  There 
was  no  telegraph,  no  cable,  no  railroad,  and  it  took  weeks 
for  the  news  of  Europe  to  reach  New  York.  The  hazards 
of  speculative  stock  operations  were  very  great  indeed. 
Nevertheless  the  stock  market  steadily  expanded  with  the 
rapid  growth  of  the  country  and  independently  of  the 
mightier  markets  on  the  other  side  of  the  Atlantic.  An 
era  of  promotion  set  in  about  1824  which  added  to  the 
number  of  securities  in  the  market.  In  that  year  companies 
having  a  capital  of  #52,000,000  were  organized  in  New 
York  alone,  and  there  was  speculation  not  only  in  stocks  but 
in  mines,  cotton,  and  real  estate.  It  was  in  1822  that  the 
oldest  mining  company  in  the  country,  the  Lehigh  Coal  and 
Navigation  Company,  was  organized. 

The  appetite  of  the  public  at  this  time  for  stock  invest- 
ments was  amazing  considering  the  small  supply  of  liquid 
capital.  On  April  22d,  the  public  were  offered  #500,000  worth 
of  stock  of  the  Blackstone  Canal  and  the  subscriptions  aggre- 
gated #1,127,900  in  one  day.  Even  greater  were  the  results 
in  the  case  of  the  stock  of  the  Morris  Canal  Company,  which 
was  subscribed  for  twenty  times  over.  In  1826,  which  was  a 
year  of  bursting  of  many  bubbles,  a  large  number  of  these 


18 


274  PROGRESS  OF  THE   EMPIRE   STATE 

new  companies  went  into  bankruptcy  and  out  of  existence. 
It  was  in  this  year  that  Jacob  Barker,  who  had  been  largely 
instrumental  in  raising  loans  for  the  government  in  the  War 
of  i8i2,was  arrested  for  an  alleged  challenge  of  David  Arthur 
to  fight  a  duel  on  account  of  words  spoken  in  the  Merchants' 
Exchange — a  case  which  created  a  great  sensation  in  the 
city,  for  Barker  was  at  this  time  and  for  a  number  of  years 
thereafter  one  of  the  leading  financiers  of  the  country. 

At  this  time  an  event  of  far-reaching  importance  took 
place.  It  is  not  too  much  to  say  that  the  State  of  New 
York  owes  its  prominence  in  the  country,  its  long-continued 
power  in  commerce  and  finance,  to  two  developments:  first, 
the  organization  of  the  Stock  Exchange  in  1817  and, 
second,  the  completion  of  the  Erie  Canal  in  1825.  The 
latter  established  on  a  firm  footing  the  commercial  suprem- 
acy of  New  York  City.  From  that  time  it  began  to  take 
first  place  among  American  cities,  soon  supplanting  Phila- 
delphia in  population,  commerce,  and  wealth,  although 
Philadelphia  for  a  number  of  years  thereafter  continued  to 
be  the  headquarters  of  the  United  States  Bank,  which  under 
the  presidency  of  Nicholas  Biddle  largely  controlled  the 
money  market.  The  United  States  Bank  had  its  New 
York  branch  in  the  building  on  Wall  Street  long  occupied 
by  the  United  States  Assay  Office.  In  1825,  the  very  year 
of  the  completion  of  the  Erie  Canal,  the  great  London 
banking  house  of  Alexander  Brown  &  Sons  established  a 
branch  in  New  York  and  the  city  began  to  take  a  recognized 
place  in  the  markets  of  the  world. 

In  1827,  when  the  city  had  a  population  of  over  175,000, 
with  sixteen  banks,  including  the  branch  of  the  United 
States  Bank,  the  merchants  erected  an  exchange  in  Wall 
Street  on  the  site  of  what  was  for  a  long  time  the  Cus- 
tom House  but  which  has  now  become  the  home  of  the 
National  City  Bank.     In   this   exchange   the  stock  board 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     275 

rented  for  #500  a  year  a  room  for  its  trading,  and  here  it 
remained  until  the  great  fire  destroyed  the  building  in 
[835.  The  initiation  fee  was  raised  to  $100.  The  board 
met  in  secret,  and  transactions  were  not  made  public.  The 
value  of  continuous  and  public  quotations  was  not  then 
recognized.  The  quotations  of  September  29th,  of  this  year 
included  eight  government  securities  (National  and  State), 
twelve  banks,  five  marine  and  fourteen  fire  insurance  com- 
panies, and  the  stocks  of  the  Delaware  and  Hudson  Canal, 
the  New  York  Gas  Light  Company,  and  the  Merchants' 
Exchange.  The  Delaware  and  Hudson  became  an  active 
stock  and  has  remained  ever  since,  a  period  of  eighty  years, 
one  of  the  best-known  securities  in  the  investment  arena. 
The  fire  insurance  stocks  were  then  eagerly  sought  after 
on  account  of  their  high  earning  power.  In  1829  the  first 
railroad  train  moved  by  steam  power  was  operated,  and  in 
the  year  following,  the  list  of  the  stock  board  for  the  first 
time  contained  the  name  of  a  railroad  stock.  It  was  that 
of  the  Mohawk  &  Hudson,  now  a  part  of  the  New  York 
Central  system.  American  stocks  had  even  then  been  long 
traded  in  in  London,  but  it  was  not  until  1838  that  the  first 
railroad  security  was  introduced  there. 

We  have  now  reached  a  time  when  it  is  possible  to  give 
some  account,  fragmentary  though  it  be,  of  the  stock  market 
as  it  appeared  to  those  living  three  quarters  of  a  century  ago. 
Ex-Mayor  Philip  Hone,  then  a  leading  citizen  of  New  York, 
kept  a  diary  in  which  he  recorded  a  number  of  references 
to  the  stock  market  and  Wall  Street.  On  July  23,  1832,  he 
says  that  notwithstanding  the  cholera  then  prevailing  he 
went  to  Wall  Street  and  did  considerable  business.  A  year 
before,  he  had  recorded  the  extraordinary  prosperity  and 
business  activity  that  existed  all  over  the  country  and  espe- 
cially in  New  York,  but  in  November,  1833,  he  comments 
with  much  severity  upon  what  he  called  "the  ill  advised 


276  PROGRESS  OF  THE   EMPIRE   STATE 

action  "  of  President  Jackson  in  removing  deposits  from  the 
United  States  Bank.  This,  he  said,  produced  an  awful 
scarcity  of  money  and  a  sharp  fall  in  prices,  Delaware  & 
Hudson  declining  from  125  to  114.  This  refers  of  course 
to  the  war  which  Jackson  carried  on  against  the  United 
States  Bank  that  led  to  its  overthrow  and  finally  culminated 
in  the  panic  of  1836.  It  was  in  1833  that  Jacob  Little 
appeared  prominently  upon  the  scene  of  action  as  a  leader 
in  the  stock  market.  He  had  been  a  clerk  of  Jacob  Barker 
and  was  for  many  years  a  noted  bear  operator.  He  is 
generally  credited  with  having  introduced  short  selling 
in  the  New  York  market.  This  is  not  strictly  accurate.  He 
undoubtedly  made  short  selling  prominent,  but  bear  trad- 
ing had  been  imported  from  London  long  before,  and  in  181 2 
the  New  York  Legislature  passed  a  bill  prohibiting  sales  of 
stocks  not  actually  in  possession  of  the  seller.  The  law 
was  a  dead  letter  and  was  repealed  in  1858.  Little  made  a 
fortune  in  the  panic  of  1836  but  in  the  next  decade  lost  a 
large  portion  of  it  in  the  first  extensive  operation  that  he 
entered  into  upon  the  bull  side. 

To  return  to  Mr.  Hone's  diary.  On  December  27,  1833, 
he  records  that  panic  prevails  and  that  stocks  are  falling. 
On  December  30th  he  said  that  the  times  were  "dreadfully 
hard."  He  records  the  failure  of  Shipman  &  Corning 
as  brokers  who  had  been  "gambling  in  Delaware  & 
Hudson."  Hone  himself  lost  #20,000  in  sixty  days.  No 
wonder  that  he  felt  aggrieved  with  the  action  of  Jackson 
in  attacking  the  United  States  Bank,  which  he  attributes  to 
"the  sin  of  Nicholas  Biddle  in  opposing  Jackson's  election." 
Hone  writes  that  "the  gambling  in  stocks  has  been  carried 
on  by  brokers  to  an  extent  disgraceful  to  the  character  of 
the  city."  This  is  alleged  to  be  one  cause  of  the  distress. 
Then  he  goes  on  to  describe  the  process  of  selling  stocks 
short  as  practiced  by  Jacob  Little,  although  he  does  not 


HIS  loin    OF    INI    NEW  YORK  STOCK  EXCHANGE     277 

mention  his  name.  "It  consists,"  he  said,  "in  selling  stocks 
ahead,  where  a  man  sells  to  the  amount  of  millions  without 
owning  a  dollar  of  the  stock — betting  it  will  fall  and  then 
taking  pains  by  every  kind  of  lying  and  chicanery  to  injure 
the  reputation  of  the  stock  so  that  he  may  win."  On 
February  11,  1834,  Hone  attended  a  big  mass-meeting  in  the 
Merchants'  Exchange  in  Wall  Street  to  protest  against  the 
removal  of  the  government  deposits.  The  country,  how- 
ever, recovered  from  the  blow  of  the  removal  of  these  depos- 
its, and  in  January,  1835,  Hone  commented  upon  the  rage 
for  speculation  in  lands  as  being  one  of  the  bubbles  of  the 
day.  On  October  14,  1835,  he  wrote  that  "gambling  in 
stocks  in  Wall  Street  has  arrived  at  such  a  pitch  and  the 
sudden  reverses  of  fortune  are  so  frequent  that  it  is  a  matter 
of  every  day  intelligence  that  some  unlucky  rascal  has  lost 
other  people's  money  and  run  away." 

The  newspapers  had  already  begun  to  report  regularly 
the  course  of  the  stock  market,  and  on  May  13,  1835,  the 
Herald,  itself  then  published  in  Wall  Street,  said: 

"Yesterday  the  fancy  stocks  took  a  tumble  of  from  two 
to  four  per  cent,  on  some  descriptions,  the  railroads  espe- 
cially. Money  is  beginning  to  get  scarce  and  there  is  a  fear 
that  the  banks  mean  to  curtail.  This  impression  does  not 
prevail  generally."  The  sales  of  the  Stock  Exchange  that 
day  amounted  to  3671  shares  and  included  the  stocks  of 
three  banks,  four  railroads,  one  canal  company,  one  gas 
company,  and  one  insurance  company.  Of  course  the 
number  of  stocks  of  which  quotations  were  given  was  much 
larger. 

Some  idea  of  the  market  fluctuations  at  this  interesting 
period  of  the  stock  market  is  afforded  by  the  fact  that  from 
August  to  December  30th  Delaware  &  Hudson  fell  from  125 
to  99,  Harlem  from  95  to  70,  and  New  York  Life  and  Trust 
from  160  to  I39>2-     In  1834,  from  January  3d  to  January 


278  PROGRESS  OF  THE   EMPIRE   STATE 

17th,  there  was  a  decline  from  91  to  73  in  Delaware  &  Hud- 
son while  Mohawk  &  Hudson  advanced  from  80  to  94. 
In  1835  there  was  a  big  speculation  in  stocks  as  in  lands. 
Higher  prices  prevailed  in  commodities  as  in  securities.  In 
1836,  however,  the  great  movement  of  inflation  which  had 
been  going  on  for  a  number  of  years  collapsed,  and  in  October, 
1836,  nearly  a  dozen  failures  were  announced  in  the  Street. 
The  panic  swept  over  the  entire  country  and  in  fact  was 
felt  throughout  the  world,  and  on  May  9,  1837,  the  New 
York  banks  were  obliged  to  suspend  payments.  Philip 
Hone  speaks  of  that  event  in  these  words: 

"The  volcano  bursts  and  overwhelms  New  York.  The 
banks  suspend  payments.  Wall  Street  was  greatly  crowded 
but  there  was  no  riot  or  tumult." 

From  1837  to  1839  there  were  33,000  failures  in  the 
United  States,  involving  a  loss  of  #440,000,000.  The 
United  States  Bank,  deprived  of  its  federal  charter,  con- 
tinued in  business  for  a  few  years  under  a  Pennsylvania 
charter  and  finally  went  out  of  business  entirely  in  1841,  and 
Hone  declared  that  the  losses  caused  by  this  failure  equaled 
even  those  of  the  great  fire  which  destroyed  New  York  on 
December  16,  1835.  He  was  very  pessimistic  in  his  views  and 
asserted  that  the  failure  has  caused  "an  utter  destruction 
of  American  credit  abroad." 

The  year  1835  had  been  notable  for  its  corners  and  so 
wild  became  the  speculation  that  the  Stock  Exchange  had 
to  close  its  doors  twice.  In  fact,  the  history  of  the  stock 
market  contains  nothing  that  equals  for  audacity  the  corners 
in  Morris  Canal  and  in  Harlem  if  that  year,  although  there 
have  been  a  multitude  of  transactions  of  greater  magnitude. 
The  shorts  in  Morris  Canal  were  compelled  to  settle  at  150 
by  a  clique  which  had  bought  the  stock  at  much  below  par. 
Another  combination  in  Harlem  compelled  the  shorts,  who 
had  sold  in  two  months  60,000  shares  of  a  stock  of  which 


GEORGE  WALBRIDGE  PERKINS 

Fin  ,n  in  Chicago,  III.,  January  31,  1862;  educated  in 

public  schools  of  Chicago;  began  business  life  in  Chicago  office  of 
Insurance  Co.,  1877,  as  an  office  boy,  later  becom- 
ing successively  bookkeeper,  cashier,  and  inspector  of  agencies. 
Mr.  Perkins  was  made  superintendent  of  the  western  department 
of  the  company  in  1889,  and  in  1892  third  vice-president  in  charge 
of  the  agency  force,  with  headquarters  at  the  home  office  in  Xew 
City;  promoted  to  second  vice-president,   1898;  to  vice- 
president,  1903;  and  elected  chairman  of  the  Finance  Committee 
of  the  company  in  1900.     Partner  in  the  banking  firm  of  J.  P. 
Morgan  &   Co.,  1901  to    1911.     At  various  times  chairman  ex- 
ecutive committee  and  director  Chicago,  Burlington  &  Quincy 
Radroad;  chairman  board  of  directors  Cincinnati,  Hamilton  & 
Dayton  Railroad,  and  Pere  Marquette-  Railroad  Co.;  president 
and  director  Toledo  Railway  &  Terminal  Co.;  chairman  finance 
committee    and    director    International    Harvester    Co.;    vice- 
president  and  director  Great  Central  Dock  Co.;  trustee  New 
York   Trust    Co.;    director   United    States    Steel    Corporation 
Northern  Pacific  Railway  Co.,  National  City  Bank,  International 
Mercantile  Marine  Co.,  Bankers'  Trust  Co.,  German-American 
Insurance  Co.,  etc.     Trustee  of  Vassar  College,  and  active  worker 
for  social  reforms. 


HISTORY  OF  HIE  NEW  YORK  STOCK  EXCHANGE    279 

only  7000  shares  had  been  issued,  to  settle  at  high  figures 
for  their  folly.  From  November  25,  1834,  to  November  25, 
1835,  the  Morris  Railroad  advanced  from  70  to  120,  Harlem 
from  64  to  105,  and  Delaware  &  Hudson  from  72  to  1 13.  In 
1836  the  Exchange  appointed  a  committee  to  investigate 
corners  with  a  view  to  preventing  some  of  their  gross  abuses. 

The  great  fire  of  December,  1835,  destroyed  the  Mer- 
chants' Exchange,  and  the  stock  board  was  obliged  to  sus- 
pend operations  temporarily,  but  in  two  days  engaged  a 
room  in  Howard's  Hotel  in  Broad  Street,  the  site  of  which 
is  now  covered  by  the  present  Stock  Exchange  building. 
During  the  succeeding  six  years  the  board  occupied  rooms 
at  43  Wall  Street  in  a  building  which  at  the  beginning  of  the 
century  had  been  the  stable  of  an  English  gentleman  then 
residing  in  New  York.  In  the  panic  of  1837  one  Stock 
Exchange  house  was  large  enough  to  fail  for  liabilities  of 
#5,000,000.  So  great  was  the  subsequent  depression  that 
the  board,  having  a  surplus  of  #20,000,  instead  of  buying  a 
site  for  a  building,  divided  the  sum  among  its  eighty-eight 
members.  In  January,  1837,  the  list  of  stock  quotations 
included  ten  banks,  two  trust  companies,  eight  railroads,  and 
three  other  companies.  A  new  Merchants'  Exchange  was 
erected  and  in  this  the  Stock  Exchange  long  held  its  sessions. 

I  have  discovered  some  description  of  the  stock  market 
at  this  time  in  a  little  book  entitled  A  Week  in  Wall  Street, 
published  anonymously  in  1841.  The  writer  was  clearly 
prejudiced  against  Wall  Street  but  nevertheless  some 
instructive  information  may  be  obtained  from  its  pages. 
In  his  preface  he  declared  that  there  was  existing  at  that 
time  "a  demoralized  condition  of  principle  in  regard  to 
pecuniary  transactions."  He  admits  that  he  had  himself 
been  "flunked"  in  Wall  Street.  He  describes  joint  stock 
companies  as  "an  ingenious  device  wherein  an  imaginary 
body  is  made  accountable  for  the  acts  of  its  members,  while 


280  PROGRESS  OF  THE   EMPIRE   STATE 

real  actors  may  hide  behind  it  as  long  as  it  has  power  to 
protect  them  and  scamper  off  without  warning  when  it  has 
not."  He  defines  a  broker  as  "a  negotiator  between  two 
parties  who  contrives  to  cheat  both."  He  said  that  while 
credit  well  sustained  gave  success  to  enterprise,  by  its 
misapplication  and  abuse  it  had  come  to  have  a  different 
significance,  namely,  that  "the  more  one  owes  the  more  he 
has  to  sport  with."  In  describing  the  board  of  brokers  the 
writer  declared  that  when  a  broker  is  employed  by  another 
person  to  buy  or  sell  on  time  he  has  the  right  to  give  the 
name  of  his  principal  within  twenty-four  hours,  and  then 
if  the  other  party  is  not  satisfied  he  is  required  to  deposit 
ten  per  cent.  Stocks  sold  on  time  were  seldom  delivered, 
but  when  the  contract  matured  the  difference  between  the 
sale  and  the  average  market  price  was  paid  over  by  the 
loser.  He  said  that  there  was  a  large  class,  sometimes 
controlling  a  good  deal  of  money,  who  made  speculation 
their  business  and  often  united  in  squads  for  the  purpose  of 
cornering.  These  professionals  were  called  "bull  backers" 
or  "bear  traps,"  according  to  the  nature  of  their  operations. 
The  former  bought  stocks  for  a  rise  and  the  second  sold 
stocks  for  a  decline.  Bull  backers  and  bear  traps  are  terms 
which  have  disappeared  from  Wall  Street.  There  was 
another  class  described  by  the  writer  as  called  "flunkies." 
This  is  another  term  lost  to  Wall  Street  which  now  uses  the 
word  "lambs"  to  describe  the  same  class  of  persons,  namely, 
those  who  enter  into  speculation  without  any  knowledge  or 
intelligence  and  generally  leave  their  money  behind.  Stock 
gamblers,  he  said,  of  very  small  capital  often  have  contracts 
pending  of  many  hundreds  of  thousands  of  dollars.  When 
a  broker  operates  for  others  he  usually  requires  a  deposit 
of  ten  per  cent,  as  security  against  loss.  This  deposit  is 
now  called  "a  margin." 

The  pessimism  of  this  view  of  Wall  Street  was  a  reflec- 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     281 

tion  of  the  great  losses  entailed  by  the  panic  of  1837  and 
the  depression  which  followed.  This  depression  was  so 
great  that  Philip  Hone,  describing  the  new  Custom  House, 
now  the  Sub-Treasury  in  Wall  Street,  then  just  completed, 
in  1842,  said  it  was  "a  magnificent  winding-sheet  of  de- 
parted commerce."  But  even  as  he  wrote  the  process  of 
recovery  had  started,  and  for  fifteen  years  there  was  steadily 
advancing  activity  and  prosperity  in  this  country  interrupted 
only  by  a  temporary  setback  in  1848.  It  was  in  this  very 
year  of  1848,  when  gold  was  discovered  in  California,  that 
another  description  of  Wall  Street  and  the  stock  market 
was  published  in  a  magazine  of  that  day  from  which  we  are 
able  to  obtain  a  somewhat  lifelike  picture  of  conditions 
as  they  existed  sixty  years  ago.  "The  American  stock 
market,"  said  the  writer,  "when  compared  with  the  markets 
of  other  nations  is  peculiarly  sensitive,  and  this  was  never 
more  fully  illustrated  than  during  the  period  which  has 
elapsed  since  the  commencing  of  the  present  war  with 
Mexico."  It  should  be  remembered  that  this  was  written 
in  1848. 

"Insiders,"  he  said,  "speculate  both  on  their  own  ac- 
count and  act  as  commission  brokers  for  others."  Out- 
siders he  described  as  being  those  people  who  dabble  in 
stock  to  a  greater  or  less  extent  through  brokers.  There 
were  two  stock  exchanges  at  that  time.  The  old  Board,  the 
regular  successor  of  that  organized  in  1817,  is  described  as 
being  very  exclusive  in  character  and  as  sitting  with  closed 
doors.  The  qualification  for  membership  was  one  year  in 
business,  the  settlement  of  all  debts,  and  the  payment  of  an 
admission  fee  of  #400.  Three  blackballs  excluded  an 
applicant  and  there  was  much  blackballing,  so  that  it  was 
difficult  to  get  into  the  Board.  This  exclusiveness  caused 
the  organization  of  the  new  board  but  it  did  not  prove  suc- 
cessful, and  in  1848  it  had  only  twenty  members  and  at  the 


282  PROGRESS  OF  THE   EMPIRE   STATE 

close  of  that  year  was  consolidated  with  the  old  board. 
Business  in  the  old  board  was  carried  on  from  10.30  to  12 
and  then  from  2.45  to  3  p.m.  When  not  in  session  members, 
and  all  others  who  wished  to,  assembled  in  the  street  at  the 
corner  of  Wall  and  Hanover,  where  an  open  business  was 
conducted  in  a  volume  that  even  exceeded  the  total  tran- 
sactions of  both  boards.  Securities  could  in  1848  be 
hypothecated  for  loans  for  five  and  ten  per  cent,  less  than 
the  market  value.  The  bank  margin  at  this  time  (1912) 
is  rarely  less  than  twenty  per  cent.  Loans  could  be  ob- 
tained from  the  banks  at  the  regular  market  interest 
and  from  other  lenders  at  interest  and  a  bonus  of  one 
eighth  per  cent.  The  fluctuations  in  fancy  stocks  were 
often  from  one  to  ten  per  cent,  upward  in  a  day  and  as 
much  as  forty  per  cent,  in  decline.  The  writer  gives  an 
interesting  account  of  a  transaction  in  which  he  had  been 
concerned.  He  owned  stock  in  the  Norwich  and  Worcester 
Railroad  but  it  had  declined  to  55.  He  was  then  informed 
("tipped")  that  Cornelius  Vanderbilt  had  a  large  holding 
of  the  stock;  so  he  held  on  until  it  had  advanced  to  63^, 
when  he  sold.  The  stock  however  continued  to  advance, 
and  so  he  was  induced  to  buy  200  shares  at  66>4  when  it 
immediately  fell  ten  per  cent,  and  at  length  sold  at  less 
than  40.  Cornering  he  described  as  consisting  in  "creat- 
ing at  the  same  time  both  demand  and  scarcity,"  a  most 
felicitous  definition.  The  writer  also  tells  of  a  transaction 
in  which  Jacob  Little  was  interested.  The  bulls,  he  said, 
bought  five  thousand  shares  of  stock  and  borrowed  #100,000 
from  Little  and  #100,000  more  from  Prime,  Ward  &  Co. 
The  day  for  payment  arrived  when  Ward  failed.  Little, 
who  was  himself  a  bull,  got  early  intelligence  of  this  and 
fainted  away,  but  in  an  hour's  time  had  fully  recovered  and 
quickly  raised  the  money.  The  fact  then  leaked  out  and 
caused  a  break  of  ten  points  and  the  shattering  of  the  pool. 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE    283 

He  said  that  outsiders  were  largely  influenced  at  that 
time  by  the  money  articles  in  the  newspapers  in  most  cases 
written  by  interested  persons  or  by  individuals  bribed  with 
stocks.  In  this  respect,  as  in  many  others,  the  morality  of 
Wall  Street  has  now  greatly  advanced.  The  facility  with 
which  fortunes  were  made  in  Wall  Street  at  that  time  he 
illustrates  by  the  history  of  two  brothers  named  Josephs 
who  came  from  Richmond  with  about  $20,000.  Later 
they  formed  a  partnership  with  M.  Henriques  and  finally 
had  a  capital  of  $490,000  and  made  several  millions  of 
dollars.  This  is  the  firm  that  in  1837  is  mentioned  as 
having  failed  for  $5,000,000. 

The  writer  gives  a  list  of  bubble  stocks  among  which  he 
names  the  North  American  Trust  and  Banking  Company, 
the  stock  of  which  sold  at  $20  even  after  going  into  receiver's 
hands.  Others  were  the  Commercial  Railroad  of  Vicksburg, 
the  Morris  Canal,  the  Canton  Company,  the  Mohawk 
&  Hudson,  the  Harlem,  the  Stonington,  and  the  Norwich 
&  Worcester.  He  describes  the  Reading  stock  as  a  "worth- 
less trap"  and  as  being  one  of  the  mammoth  operations 
of  Nicholas  Biddle.  The  Reading  has  continued  ever  since 
to  be  one  of  the  most  active  stocks  in  the  market  list  and  it, 
Erie,  and  Northern  Pacific  have  been  identified  with  more 
"great  days"  in  Wall  Street  than  any  other  three  securities. 
He  mentions  a  corner  in  Norwich  &  Worcester  conducted 
by  Jacob  Little.  Little  carried  the  price  to  95,  when  there 
was  a  break  to  60.  Certain  parties  who  had  sold  3000 
shares  for  delivery  in  twelve  months  offered  to  sell  at  $30,000. 
Little  refused,  and  they  held  on  so  that  in  the  subsequent 
decline  they  bought  in  at  prices  which  netted  them  a  profit 
of  $60,000.  It  is  of  interest  to  note  that  the  writer  men- 
tions the  Farmers  Loan  and  Trust  Company  as  one  of  the 
"bubble"  stocks  of  that  period,  although  now  this  company 
is  one  of  the  largest,   most  substantial  and  conservative 


284  PROGRESS  OF  THE   EMPIRE  STATE 

institutions  in  the  city.  He  gives  also  a  description  of 
many  of  the  leading  brokerage  houses.  Drew,  Robinson 
&  Co.,  he  said,  were  worth  over  $1,000,000.  Another 
firm  was  that  of  Clark,  Dodge  &  Company  which  he 
described  as  standing  high  and  having  branch  offices  at 
Boston,  Providence,  Philadelphia,  and  Baltimore.  This  is 
a  firm  name  that  still  commands  high  respect  in  Wall  Street. 
David  Clarkson  was  then  president  of  the  Exchange  and 
described  as  "respectable  and  possessing  great  nerve." 
He  had  once  been  worth  $300,000.  In  1845  it  was  estimated 
that  Little  was  worth  $500,000  and  Daniel  Drew  $300,000. 
The  discovery  of  gold  in  1848  started  the  magnificent 
boom  period  that  lasted  until  1857.  The  enormous  produc- 
tion of  gold  caused  an  uplift  of  prices,  an  impetus  to  enter- 
prise, the  building  of  railroads,  the  multiplication  of  banks, 
and  a  widespread  speculation  in  stocks,  lands,  and  commodi- 
ties. Several  other  things  had  happened  beside  the  dis- 
covery of  gold  which  contributed  to  make  this  a  memorable 
financial  period.  Morse  had  invented  the  telegraph,  and 
in  1844  the  first  telegraph  line  was  constructed.  In  1846 
the  independent  treasury  system  was  established  as  it 
exists  substantially  to-day.  A  greater  stability  had  been 
imparted  to  banking  in  the  State  of  New  York  by  the 
abolition  of  special  charters  to  banks  and  the  enactment 
in  1838  of  an  admirable  free  banking  law,  which  later  became 
the  model  on  which  the  national  banking  act  was  drafted. 
During  the  boom  period  a  further  notable  improvement 
in  New  York  banking  was  brought  about  by  the  organization 
in  1853  of  the  Bank  Clearing  House.  In  the  same  year 
the  United  States  established  an  assay  office  in  Wall 
Street,  and  the  Corn  Exchange  was  organized.  During 
this  period  not  only  Jacob  Little  but  George  Law,  Dean 
Richmond,  Nelson  Robinson,  and  other  capitalists  were 
conspicuous  in  financial  operations,  while  Commodore  Van- 


-f 


JULES  S.  BACHE 

Banker;  born  in  New  York  City,  November  9,  1861;  son 
Semon  and  Elizabeth  (Van  Praag)  Baehe;  educated  Charlier 
Institute,  N.  Y.;  married  in  New  York  City,  March  23,  1891, 
Florence  R.  Scheftel.  Now  senior  partner  J.  S.  Bache  & 
bankers;  chairman  executive  committee  Now  .Amsterdam  Casu- 
alty Co.;  director  International  Banking  Corporation,  National 
Bank  of  Cuba,  Empire  Trust  Co.,  Anniston  City  Land  Co.,  New 
River  Collieries  Co.,  Oakland  &  Bayside  Realty  Co.  Member 
New  York,  Lambs,  Lawyers,  and  Automobile  Clubs. 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE    285 

derbilt,  Daniel  Drew,  and  Jay  Gould  began  their  mammoth 
operations. 

The  panic  of  1857  came  with  startling  suddenness  and 
devastating  severity  on  August  24,  1857,  when  the  Ohio 
Life  and  Trust  Company,  having  a  branch  office  in  Wall 
Street,  failed.  Two  months  later  all  the  banks  in  the  city, 
except  the  Chemical,  suspended  specie  payments.  An  old 
cut  gives  a  picture  of  Wall  Street  on  the  day  of  the  suspen- 
sion of  the  banks.  The  street  was  crowded  with  excited 
people  in  front  of  what  is  now  the  National  City  Bank. 
The  president  of  the  American  Exchange  Bank  addressed 
the  excited  crowd  in  front  of  his  bank  in  hopes  of  allaying 
the  excitement.  The  Stock  Exchange  is  described  as 
having  looked  like  a  "gathering  of  demons."  Bull  and 
bear  came  into  personal  contact  and  fierce  blows  mingled 
with  the  ceaseless  rapping  of  the  president's  hammer  and 
the  terrible  slaughtering  of  every  description  of  security. 
The  decline  in  the  prices  of  the  leading  stocks  was  sharp  and 
extreme.  For  instance,  Reading  Railroad  stock  fell  36^ 
points  from  August  to  October,  Michigan  Central  37  in 
the  same  time,  Illinois  Central  323^,  Rock  Island  31^2, 
Panama  20,  American  Exchange  Bank  40J/4,  New  York 
Central  iojkf,  and  Virginia  State  6's  13^. 

Sudden  as  was  the  blow  and  severe  as  was  its  effect, 
the  stock  market  depression  did  not  last  long.  The  fol- 
lowing year  prices  recovered  and  the  Exchange  was  so 
prosperous  that  the  initiation  fee  was  raised  to  #1000  except 
for  clerks  who  had  served  three  years.  The  banks  had 
resumed  specie  payments  the  preceding  12th  of  December. 

The  country,  with  remarkable  vitality,  quickly  recovered 
from  the  effects  of  the  panic.  It  needed,  indeed,  all  its 
strength,  for  another  crisis  greater  than  that  of  financial 
panic  was  soon  to  confront  it — the  crisis  of  the  Civil  War. 

We  now  enter  upon  the  period  of  modern  speculation. 


286  PROGRESS  OF  THE   EMPIRE  STATE 

This  is  a  theme  much  too  vast  for  the  limits  of  a  single 
chapter.  Nowhere  else  has  the  stock  market  developed  on 
so  enormous  a  scale  and  with  such  dynamic  power  as  in 
Wall  Street  from  1861  to  the  present  day.  Here  upon  the 
arena  of  the  Stock  Exchange  the  great  operations  have  been 
carried  on  out  of  which,  in  spite  of  many  colossal  wrongs, 
the  criminal  conspiracies  of  manipulative  pools,  and  the 
madness  of  a  generation  intoxicated  by  the  possession  of 
fabulous  wealth,  the  capital  has  been  mobilized  for  the 
development  of  the  splendid  resources  of  our  nation. 

The  stock  market  during  the  Civil  War  was  neither  loyal 
nor  disloyal.  Markets  as  a  rule  seek  to  ascertain  values  in 
a  cold-blooded  way  without  much  regard  to  patriotic 
considerations.  It  does  not  follow,  however,  that  the  stock 
market  does  not  perform  at  times  a  patriotic  service.  M. 
About,  writing  of  the  French  stock  market,  said  that  it  is 
speculations  that  "make  the  prosperity,  the  strength,  and 
the  greatness  of  France."  He  added  that  they  give  vigor 
to  the  most  timid  capitalists.  They  furnish  millions  for 
the  operations  of  peace  and  war.  "If  we  ever  revenge 
ourselves  for  the  misfortunes  of  Napoleon,"  he  said,  "it 
will  be  less  on  the  battle  field  than  on  the  green  baize  of 
speculation."  While  this  may  be  too  sweeping  a  claim, 
yet  as  regards  Wall  Street  it  is  true  that  its  transactions 
during  the  Civil  War  did,  in  the  main,  contribute  to  the 
preservation  of  the  nation.  Certainly  Wall  Street  deserves  a 
large  share  of  the  credit  for  the  floating  of  the  #2,700,000,000 
national  debt  created  between  i860  and  1866.  It  was  well 
paid  for  its  services,  but  the  risks  were  enormous.  The 
passage  of  the  law  creating  the  national  banking  system 
and  providing  for  a  note  circulation  secured  by  government 
bonds  greatly  aided  the  government  in  marketing  its  war 
bonds.  The  bankers,  besides  aiding  the  government,  came 
to  the  rescue  of  the  commercial  credits  of  the  country  at 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE    287 

this  time  when  the  necessities  of  the  nation  were  so  great. 
The  recently  organized  Bank  Clearing  House  for  the  first 
time  issued  loan  certificates  and  from  i860  to  1864  put  out 
$59<  159,000  of  these  certificates,  the  largest  amount  out- 
standing at  one  time  being  $21,960,000  in  1862.  In  five 
other  financial  crises:  namely,  1873,1884,1890,  1893,  and 
1907,  the  Clearing  House  repeated  this  service.  Its  total 
issue  of  loan  certificates  in  the  various  panics  since  i860 
has  amounted  to  $269,834,000.  These  have  been  the  chief 
bulwarks  of  the  credits  of  the  country  in  the  periodic 
financial  crises,  preventing  the  spread  of  disaster. 

Even  the  speculation  in  gold,  bad  as  it  was  in  many 
respects,  and  which  the  government  by  various  acts  sought 
to  prevent,  actually  served  a  useful  purpose  inasmuch  as 
it  "tended  to  keep  gold  in  the  country  by  giving  its  holders 
the  continued  prospect  of  an  advance  in  prices."1 

The  Stock  Exchange,  whatever  may  be  said  of  the  stock 
market,  gave  practical  proof  of  its  patriotism  during  the 
Civil  War.  Early  in  1861  it  passed  resolutions  pledging 
its  fidelity  to  the  union  and  appropriating  all  the  money 
in  its  treasury  to  sustain  the  government.  It  prohibited 
dealings  in  the  bonds  of  any  of  the  seceding  States,  and  when 
gold  went  to  a  premium  and  became  a  speculative  com- 
modity, while  it  placed  it  on  its  list,  it  did  not  encourage 
dealings  in  it,  and  as  a  matter  of  fact  the  great  gold  specu- 
lation during  the  war,  which  continued  for  a  number  of  years 
thereafter,  was  carried  on  outside  of  the  Stock  Exchange. 

At  the  opening  of  the  war  the  Exchange  was  almost 
a  secret  organization  with  admission  made  exceedingly 
difficult  by  reason  of  the  blackballing  of  applicants.  It 
furnished  facilities  which  at  this  day  would  be  considered 
absurdly  meager.  The  quotations  were  not  distributed  as 
now  by  tickers,  but  carried  by  brokers  from  office  to  office. 

1  The  Nation  in  1866. 


286  PROGRESS  OF  THE   EMPIRE  STATE 

This  is  a  theme  much  too  vast  for  the  limits  of  a  single 
chapter.  Nowhere  else  has  the  stock  market  developed  on 
so  enormous  a  scale  and  with  such  dynamic  power  as  in 
Wall  Street  from  1861  to  the  present  day.  Here  upon  the 
arena  of  the  Stock  Exchange  the  great  operations  have  been 
carried  on  out  of  which,  in  spite  of  many  colossal  wrongs, 
the  criminal  conspiracies  of  manipulative  pools,  and  the 
madness  of  a  generation  intoxicated  by  the  possession  of 
fabulous  wealth,  the  capital  has  been  mobilized  for  the 
development  of  the  splendid  resources  of  our  nation. 

The  stock  market  during  the  Civil  War  was  neither  loyal 
nor  disloyal.  Markets  as  a  rule  seek  to  ascertain  values  in 
a  cold-blooded  way  without  much  regard  to  patriotic 
considerations.  It  does  not  follow,  however,  that  the  stock 
market  does  not  perform  at  times  a  patriotic  service.  M. 
About,  writing  of  the  French  stock  market,  said  that  it  is 
speculations  that  "make  the  prosperity,  the  strength,  and 
the  greatness  of  France."  He  added  that  they  give  vigor 
to  the  most  timid  capitalists.  They  furnish  millions  for 
the  operations  of  peace  and  war.  "If  we  ever  revenge 
ourselves  for  the  misfortunes  of  Napoleon,"  he  said,  "it 
will  be  less  on  the  battle  field  than  on  the  green  baize  of 
speculation."  While  this  may  be  too  sweeping  a  claim, 
yet  as  regards  Wall  Street  it  is  true  that  its  transactions 
during  the  Civil  War  did,  in  the  main,  contribute  to  the 
preservation  of  the  nation.  Certainly  Wall  Street  deserves  a 
large  share  of  the  credit  for  the  floating  of  the  $2,700,000,000 
national  debt  created  between  i860  and  1866.  It  was  well 
paid  for  its  services,  but  the  risks  were  enormous.  The 
passage  of  the  law  creating  the  national  banking  system 
and  providing  for  a  note  circulation  secured  by  government 
bonds  greatly  aided  the  government  in  marketing  its  war 
bonds.  The  bankers,  besides  aiding  the  government,  came 
to  the  rescue  of  the  commercial  credits  of  the  country  at 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE    287 

this  time  when  the  necessities  of  the  nation  were  so  great. 
The  recently  organized  Bank  Clearing  House  for  the  first 
time  issued  loan  certificates  and  from  i860  to  1864  put  out 
#$9,159,000  of  these  certificates,  the  largest  amount  out- 
standing at  one  time  being  #21,960,000  in  1862.  In  five 
other  financial  crises:  namely,  1873,1884,1890,  1893,  and 
1907,  the  Clearing  House  repeated  this  service.  Its  total 
issue  of  loan  certificates  in  the  various  panics  since  i860 
has  amounted  to  #269,834,000.  These  have  been  the  chief 
bulwarks  of  the  credits  of  the  country  in  the  periodic 
financial  crises,  preventing  the  spread  of  disaster. 

Even  the  speculation  in  gold,  bad  as  it  was  in  many 
respects,  and  which  the  government  by  various  acts  sought 
to  prevent,  actually  served  a  useful  purpose  inasmuch  as 
it  "tended  to  keep  gold  in  the  country  by  giving  its  holders 
the  continued  prospect  of  an  advance  in  prices."1 

The  Stock  Exchange,  whatever  may  be  said  of  the  stock 
market,  gave  practical  proof  of  its  patriotism  during  the 
Civil  War.  Early  in  1861  it  passed  resolutions  pledging 
its  fidelity  to  the  union  and  appropriating  all  the  money 
in  its  treasury  to  sustain  the  government.  It  prohibited 
dealings  in  the  bonds  of  any  of  the  seceding  States,  and  when 
gold  went  to  a  premium  and  became  a  speculative  com- 
modity, while  it  placed  it  on  its  list,  it  did  not  encourage 
dealings  in  it,  and  as  a  matter  of  fact  the  great  gold  specu- 
lation during  the  war,  which  continued  for  a  number  of  years 
thereafter,  was  carried  on  outside  of  the  Stock  Exchange. 

At  the  opening  of  the  war  the  Exchange  was  almost 
a  secret  organization  with  admission  made  exceedingly 
difficult  by  reason  of  the  blackballing  of  applicants.  It 
furnished  facilities  which  at  this  day  would  be  considered 
absurdly  meager.  The  quotations  were  not  distributed  as 
now  by  tickers,  but  carried  by  brokers  from  office  to  office. 

1  The  Nation  in  1866. 


288  PROGRESS  OF  THE   EMPIRE   STATE 

The  telegraph  was  in  operation  but  there  were  no  news 
agencies  serving  the  brokers  with  continuous  information 
of  what  was  going  on  in  the  world,  and  it  is  a  remarkable 
fact  that  the  stock  market  advanced  the  very  day  Fort 
Sumter  was  fired  upon,  and  the  significance  of  the  event 
was  not  realized  until  the  next  day.  The  news  from  Europe 
was  always  weeks  old  before  it  reached  the  Street,  and  it  was 
not  until  1866,  when  Cyrus  W.  Field  had  completed  his 
Atlantic  cable,  that  regular  daily  quotations  were  received 
from  London  and  arbitrage  dealings  between  the  two 
markets  were  started.  In  1867  the  stock  ticker  was  intro- 
duced, but  it  was  not  until  1878  that  telephones,  by  which 
the  great  bulk  of  orders  are  now  transmitted  to  the  Exchange, 
were  put  in  use. 

Nevertheless  without  these  facilities  a  stupendous  specu- 
lation was  developed,  and  it  is  believed  that  the  transac- 
tions in  the  several  board  rooms  and  on  the  curb,  carried 
on  by  night  as  well  as  by  day,  nearly  equaled  the  sales  of 
the  Stock  Exchange  during  its  recent  best  year. 

It  has  already  been  seen  how  war  stimulates  stock  mar- 
kets, and  the  War  of  the  Rebellion  with  its  fearful  hazards, 
its  enormous  output  of  fiat  money  and  new  securities  created 
a  speculation  which,  for  excitement,  has  not  been  exceeded 
since.  Besides  the  regular  stock  board,  which  in  1863 
changed  its  name  to  its  present  title,  The  New  York 
Stock  Exchange,  there  was  organized  in  1864  the  open 
board  of  stock  brokers,  and  also  the  New  York  Gold  Ex- 
change, while,  as  has  been  said,  there  were  immense 
dealings  on  the  curb  and  at  night  in  the  corridors  of  the 
Fifth  Avenue  Hotel.  Night  exchanges  were  started  up- 
town. Gallagher's  Stock  Exchange  opened  in  West  24th 
Street  on  April  15,  1865,  and  had  accommodations  for  1200 
persons.  Among  these  "accommodations"  were  a  bar  and 
a  billiard  room.     It  was  during  this  period  that  the  Harlem, 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     289 

the  Prairie  du  Chien,  and  the  Fort  Wayne  corners  occurred. 
The  collapse  of  the  Fort  Wayne  deal  in  1864  caused  a  stock 
panic  of  no  small  dimension.  In  1865  the  Exchange  had, 
in  the  name  of  a  building  company,  a  new  #450,000  home 
erected  for  itself  in  Broad  Street,  covering  a  part  of  the  site 
of  the  present  Exchange.  The  board  room  was  on  the 
second  floor,  while  the  ground  floor  was  leased  to  a  number  of 
brokers  who  used  it  for  conducting  business  between  calls. 
Members  and  non-members  were  admitted  in  this  room  on 
payment  of  an  annual  fee. 

In  1869  an  event  occurred  of  large  importance.  The 
Stock  Exchange  and  the  open  board  of  brokers  were  con- 
solidated and  a  radical  change  in  government  took  place. 
Already,  in  the  year  previous,  memberships  had  been  made 
transferable  by  sale,  and  new  members  instead  of  being 
elected  by  ballot  were  chosen  by  a  committee  on  admission. 
In  1869  the  government  of  the  Exchange,  instead  of  being 
carried  on  directly  by  the  members,  was  vested  in  a  Govern- 
ing Committee  elected  by  the  members,  with  powers  corre- 
sponding to  those  of  a  board  of  directors  of  a  corporation. 
In  the  Exchange  thus  consolidated,  dealings  instead  of  being 
limited  to  call  were  made  continuously  during  the  Exchange 
hours  and  were  prohibited  thereafter.  At  last,  after  many 
years,  Wall  Street  had  an  exchange  representative  of  its 
whole  body  of  brokers  and  adequate  for  the  transaction  of  an 
immense  business.  The  consolidated  membership  was  1060 
which  was  afterward  increased  to  1 100,  its  present  limit.  In 
1 871  the  Exchange  remodeled  its  building  and  became  a  thor- 
oughly modern  institution,  in  a  true  sense  "a  public  mirror 
of  values."1  An  important  reform  of  1869  had  been  the 
establishment  of  an  exchange  law  requiring  shares  of  active 
stocks  to  be  registered  with  some  satisfactory  agency,  thus 
doing  away  with  the  fraud  and  abuse  of  secret  issues  of 

■  Conant,  Wall  Street  and  the  Country,  p.  68. 


290  PROGRESS  OF  THE    EMPIRE   STATE 

stock  and  their  sale  before  the  fact  of  issue  had  been  made 
public. 

In  1868,  before  the  consolidation  of  the  two  boards,  it 
was  estimated  that  the  official  sales  at  the  two  boards 
aggregated  19,713,402  shares  of  stock  and  #245,245,240 
par  value  of  bonds,  but  this  was  only  a  small  part  of  the 
actual  business  of  the  street.  "To-day,"  wrote  Medbery 
in  1870,  "the  New  York  Stock  Exchange  eclipses  all  other 
organizations  in  the  world  for  wealth.  The  daily  credits 
and  deposits  of  brokers  in  city  banks  and  trust  companies 
are  estimated  in  hundreds  of  millions,  and  the  par  value  of 
annual  sales  made  at  the  boards  and  over  the  country  are 
computed  as  considerably  exceeding  #22,000,000,000.  This 
notable  increase  in  financial  importance  has  been  attended 
by  corresponding  results.  Speculations  which  in  former 
times  swept  over  the  Street  like  a  monsoon  now  produce 
mere  ripples.  A  healthy  conservatism  and  a  profound  sense 
of  responsibility  lay  at  the  base  of  the  vast  proportion  of 
operations."  He  called  attention  to  the  important  results 
of  the  consolidation  and  said  that  the  Governing  Committee 
had  three  vital  objects  to  serve;  first,  a  rigid  scrutiny  of  all 
securities  dealt  in:  second,  a  surveillance  over  members  in 
respect  to  their  fidelity  to  contracts,  and,  third,  a  systema- 
tization  of  the  whole  business  of  brokers  so  far  as  it  relates 
to  the  intercourse  of  members. 

The  Stock  Exchange,  on  the  whole,  has  in  the  past 
thirty-seven  years  provided  a  wise  regulation  of  the  stock 
market,  giving  increased  safeguards  for  investments  and 
constantly  extending  the  area  of  that  publicity  by  which 
alone  the  dangers  incident  to  transactions  in  stocks  may  be 
diminished  and  the  benefits  correspondingly  magnified. 

While  it  was  true,  as  Medbery  boasted,  that  a  healthy 
conservatism  and  a  profound  sense  of  responsibility  lay  at  the 
base  of  the  vast  proportion  of  operations,  yet  even  as  he 


SAMUEL  SPENCER 

R.I: 

and  ;  inia  j„  ,*,  ,nt  in 

upon   the 

cinnal  ic  Railway  Compan 

Rail- 

;land; 
Centr;  .    Milwaul 

•il  Railwa 
ion  S<  Richmon  urg  &  Po1 

Railr  York; 

Hanover  National  Bank  <  i  ompany  of  Ann 

New  ':  i  ompany.     He 

member    of    the     New    York    Chamber    of    Commerce.       Died 

nber  29,  1906. 


HISTORY  OF   I  Hl;.  NEW  YORK  STOCK  EXCHANGE     291 

wrote  the  Erie  wars  were  in  progress,  and  in  the  year  preced- 
ing, on  September  24th,  occurred  the  famous  Black  Friday 
panic  which  was  the  culmination  of  the  gold  conspiracy 
engineered  by  Jay  Gould  and  James  Fisk.  It  should  be 
said  that  the  gold  speculation  was  not  carried  on  in  the 
Stock  Exchange,  hut  in  the  Gold  Exchange  organized  espe- 
cially for  that  purpose  and  which  for  several  years  was  the 
center  of  an  excited  speculation.  The  premium  on  gold 
finally  disappeared,  and  in  1879  specie  payments  were 
definitely  resumed. 

The  gold  conspiracy  and  the  Erie  wars  make  dramatic 
chapters  in  the  history  of  speculation.  They  were  the 
subject  of  government  investigation  and  have  been  the 
theme  of  many  books.  They  must,  however,  be  dismissed 
with  the  merest  reference  in  this  review.  Both  illustrate 
all  that  is  most  wicked  and  demoralizing  in  corporation 
management,  stock  market  manipulation,  and  criminal 
speculation.  The  Congressional  report  on  the  gold  corner 
compared  the  power  of  Fisk  in  Wall  Street  with  the  malign 
influence  which  Cataline  exercised  in  Rome.  Adams,  in 
his  brilliant  account  of  the  Erie  wars,  described  the  trans- 
actions as  the  acts  of  "freebooters."  The  Black  Friday 
panic,  although  brought  about  by  the  speculation  in  gold, 
communicated  itself  to  the  stock  market,  and  there  were 
fourteen  failures  on  the  Stock  Exchange.  The  Erie  wars 
lasted  for  twenty  years,  from  1852  to  1872,  when  Gould, 
who  had  succeeded  in  getting  control  of  the  road  after  a 
long  contest  between  Commodore  Vanderbilt  and  Daniel 
Drew,  was  himself  driven  from  power.  The  Drew  device 
of  issuing  new  stock  and  flooding  the  market  with  it  and  then 
preventing  its  transfer  on  the  books  was  copied  by  Gould. 
Adams  declared  that  it  was  the  most  extraordinary  feat 
of  financial  legerdemain  ever  recorded.  There  have  been 
several  expert  exhibitions  of  financial  legerdemain  in  our 


292  PROGRESS  OF  THE   EMPIRE  STATE 

own  days,  but  this  particular  device  is  now  impossible  under 
the  rules  of  the  Exchange,  and  it  may  be  said  that  every 
year  makes  it  more  and  more  difficult  to  play  the  game  of 
business  with  marked  cards. 

The  Chicago  fire  on  October  8,  1871,  and  the  Boston 
fire  on  November  9,  1872,  caused  several  failures  in  the 
Stock  Exchange,  and  in  1873  tne  l°ng  period  of  war  inflation, 
during  which  time  there  were  vast  railroad  constructions, 
notably  that  of  the  first  transcontinental  line,  came  to  an 
end  in  one  of  the  widespread  and  devastating  panics  which 
occur  about  once  in  every  twenty  years,  with  a  minor  convul- 
sion midway  between.  The  panic  started  with  the  failure 
on  September  18,  1873,  °f  tne  firm  OI"  JaY  Cooke  &  Co., 
promoters  of  the  Northern  Pacific  Railroad,  and  so  severe 
was  the  collapse  in  prices  that  it  was  almost  impossible  to 
market  securities,  and  "in  the  vicinity  of  the  Exchange, 
people  seemed  to  have  taken  leave  of  their  senses."  Two 
days  later,  September  20th,  the  Exchange  closed  its  doors 
and  its  business  was  suspended  for  ten  days.  Never  since 
has  the  Exchange  been  obliged  to  resort  to  such  a  measure 
of  protection  as  that.  There  were  fifty-seven  Stock 
Exchange  failures,  besides  a  multitude  of  insolvencies 
throughout  the  country  in  every  branch  of  trade. 

The  period  of  depression  following  the  panic  lasted  until 
1879  when,  with  the  resumption  of  specie  payments  and  a 
restoration  of  confidence,  another  business  boom  set  in, 
which  though  checked  by  the  assassination  of  Garfield  in 
1881,  did  not  end  until  the  minor  panic  of  1884,  in  which 
occurred  the  failures  of  Grant  &  Ward  and  the  Marine 
Bank.  A  stock  market  incident  of  this  panic  was  the 
failure  of  A.  S.  Hatch,  president  of  the  Exchange,  who  had 
just  been  reelected.  He  had  to  resign  and  at  a  special 
election  J.  Edward  Simmons  was  chosen  as  his  successor. 
There  were,  all  told,  fifteen  Stock  Exchange  failures  in  this 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     293 

panic.  It  was  during  this  period  that  S.  V.  White  conducted 
his  celebrated  corner  in  Lackawanna,  and  the  great  bear 
operations  of  C.  F.  WoerishofTer  and  Addison  Cammack 
were  carried  on.  In  1 S S 5  the  Exchange  established  a 
department  of  unlisted  securities  so  as  to  permit  dealings 
in  the  stocks  of  industrial  companies  which  could  not  or 
would  not  furnish  the  information  of  financial  conditions 
required  of  railroad  companies.  This  step  was  practically 
forced  upon  the  Exchange  by  the  demoralization  in  railroad 
stocks  resulting  from  the  extreme  and  wasteful  competition 
in  rates.  Only  a  very  small  proportion  of  the  securities 
dealt  in  were  in  the  unlisted  class,  and  in  April,  1910,  the 
"unlisted  department"  was  abolished. 

In  1892  the  Exchange  added  immensely  to  the  capacity 
and  stability  of  the  stock  market  by  establishing  a  system 
of  stock  clearings.  This  applied  the  principle  of  clearing 
checks,  established  with  such  advantage  between  the  banks, 
to  the  operations  of  the  stock  market.  A  limit  had  been 
reached  to  the  ability  of  the  banks  in  the  certification  of 
brokers'  checks.  Over-certification  was  not  only  illegal  but 
had  been  carried  on  to  an  extent  that  became  dangerous. 
The  stock  clearing  house  by  eliminating  over  60  per  cent,  of 
the  certification  otherwise  required  removed  this  danger  and 
at  the  same  time  extended  almost  indefinitely  the  capacity 
of  the  stock  market.  It  is  conceded  that  but  for  this  system 
the  panic  of  1893,  which  occurred  one  year  after  the  organi- 
zation of  the  Clearing  House,  would  have  been  even  more 
disastrous  to  Wall  Street  than  that  of  1873.  But  while  the 
total  value  of  the  stocks  cleared  in  1893  amounted  to 
$16,169,800,000,  the  amount  of  check  certification  required 
was  only  $1,470,700,000,  and  the  burden  upon  the  banks  was 
immensely  lightened.  In  1901,  the  year  of  memorable  specu- 
lation, the  value  of  the  stocks  cleared  was  $77,853,500,000 
while  the  certification  required  was  only  $10,930,850,600. 


294  PROGRESS  OF  THE    EMPIRE   STATE 

But  for  the  clearing  system  the  certification  required  would 
have  been  #27,995,896,400.  It  is  safe  to  say  that  the  stock 
market  would  have  broken  down  under  such  a  load.  In 
1906  when  the  volume  of  speculation  was  even  greater,  the 
money  market,  even  with  the  aid  of  the  clearing  system? 
had  difficulty  in  meeting  the  needs  of  the  stock  market  and 
those  of  the  expanding  trade  of  the  country  at  the  same  time, 
and  the  suggestion  was  made,  though  not  yet  adopted, 
that  the  clearing  system  could  be  still  further  expanded  by 
an  amendment  providing  for  semi-monthly  settlements  of 
stock  balances  while  retaining  the  rule  of  daily  settlements 
of  cash  balances.  To  Francis  L.  Eames  the  Exchange  is 
largely  indebted  for  the  establishment  of  its  clearing  house. 

The  year  1893  was  one  of  great  excitement  in  Wall 
Street.  Its  first  notable  event  was  the  collapse  of  the 
McLeod  combination  in  Reading  on  February  20th.  On 
May  4th  the  Cordage  Trust  broke  with  several  failures  and 
then  followed  a  long  series  of  disasters.  The  panic  was 
precipitated  by  the  free  silver  agitation  and  the  fear  of 
tariff  revision.  The  nation  saved  itself  from  suspension  of 
gold  payments  only  by  buying  gold  through  the  issue  of 
bonds,  and  the  merchants  were  protected  from  general 
insolvency  only  by  the  action  of  the  Bank  Clearing  House 
in  issuing  loan  certificates. 

In  1895  there  was  another  stock  market  eruption  caused 
by  President  Cleveland's  Venezuelan  message,  which 
threatened  war  with  England.  The  depression  lasted  until 
1896,  when  the  election  of  McKinley  on  a  gold  standard 
pledge  started  the  country  on  the  most  remarkable  period 
of  expansion  it  has  ever  known  and  which  lasted  until  1907, 
with  only  moderate  recessions  in  1900  and  1903.  The 
victorious  war  with  Spain,  increasing  the  international 
prestige  of  the  United  States,  helped  rather  than  retarded  the 
boom.     The  stupendous  production  of  gold,  interrupted  only 


HISTORY  01     HIE  NEW  YORK  STOCK  EXCHANGE     295 

by  the  Boer  War  and  facilitated  by  the  cheaper  processes 
of  mining,  expanded  the  world's  money  circulation.  A 
succession  of  splendid  crops  rescued  our  great  West  from 
debt  and  gave  it  a  surplus  of  wealth.  During  this  period 
measures  of  enormous  economic  significance  were  taken  to 
give  order  to  competitive  business.  Vast  combinations  of 
capital  in  railroad  and  industrial  enterprises  were  entered 
into,  and  such  power  given  to  American  commerce  and 
finance  that  two  Secretaries  of  State,  Hay  and  Root,  publicly 
announced  that  the  United  States  from  being  a  debtor  nation 
had  become  a  creditor  nation  and  that  the  financial  center 
had  passed  from  the  Thames  to  the  Hudson. 

This  was  a  period  of  financial  concentration.  Mr. 
Morgan  organized  the  billion-dollar  Steel  Corporation  which 
has  given  stability  to  the  steel  trade  and  at  the  same  time 
furnished  the  country  with  its  most  notable  illustration  of 
the  value  of  corporation  publicity.  Other  industrial  com- 
panies of  immense  size,  banks  with  #25,000,000  capital, 
railroad  systems  that  divided  the  country  into  seven  or 
eight  groups  were  formed,  and  industrial  order  took  the 
place  of  commercial  anarchy  which  had  so  long  prevailed 
to  the  injury  of  both  producer  and  consumer,  and  capital 
and  labor.  In  this  notable  work  such  names  as  J.  Fierpont 
Morgan,  John  D.  Rockefeller,  James  J.  Hill,  E.  H.  Harriman, 
Thomas  F.  Ryan,  James  Stillman,  Jacob  H.  Schiff,  August 
Belmont,  and  George  Westinghouse  became  eminent. 
"Captains  of  industry"  was  the  term  appropriately  applied 
to  these  leaders  and  others  who,  like  them,  engineered  the 
industrial  uplift.  But  they  could  not  have  accomplished 
their  work  without  the  facilities  of  the  Stock  Exchange  and 
its  regulated,  open,  stock  market.  Andrew  Carnegie,  the 
great  organizer  of  the  steel  trade,  not  long  ago  gave  utter- 
ance to  a  scathing  criticism  of  Wall  Street  and  said  that  he 
w  ished  he  could  invent  a  system  whereby  both  parties  to 


296  PROGRESS  OF  THE   EMPIRE   STATE 

stock  gambling  would  suffer.  Mr.  Carnegie,  however, 
failed  to  make  a  proper  distinction  between  speculation  and 
gambling;  and  if  it  had  not  been  for  the  machinery  of  the 
stock  market  with  its  facilities  for  speculation,  he  could 
never  have  capitalized  his  great  fortune  by  converting  it 
into  the  bonds  of  the  United  States  Steel  Corporation. 
Moreover  that  corporation  could  not  have  been  brought 
into  being  without  the  assistance  of  the  Stock  Exchange.  If 
it  is  fair  to  attribute  to  the  stock  market  the  evils  of  over- 
capitalization, criminal  promotion,  crooked  manipulation, 
and  dangerous  overtrading,  then  in  all  justice  the  credit 
should  be  accorded  it  for  acting  as  the  world's  agent  in 
supplying  the  capital  required  for  the  development  of  the 
stupendous  enterprises  which  have  in  the  last  fifteen  years 
made  this  the  richest  country  on  the  globe. 

The  most  sensational  Wall  Street  incident  of  this  period 
occurred  in  May,  1901,  when  there  was  an  extraordinary 
stock  panic  caused  by  the  contest  for  the  control  of  the 
Northern  Pacific  between  the  two  most  powerful  financial 
interests  in  the  country.  The  sales  of  stock  on  May  9, 
1901,  were  the  largest  on  record, — 3,336,695  shares.  In 
1903  there  was  a  rich  man's  panic,  otherwise  called  "the 
panic  of  undigested  securities,"  from  a  phrase  invented  by 
J.  Pierpont  Morgan.  There  was  a  severe  decline  in  stock 
prices,  but  this  was  followed  by  another  upward  movement 
and  in  1906  every  high  record  of  trade  and  speculation, 
transportation  and  banking,  was  broken  and  another  "high 
water  mark"  of  American  prosperity  was  touched.  The 
history  of  this  period  may  be  traced  in  the  average  price 
of  twenty  railway  stocks  as  compiled  by  The  Wall  Street 
Journal.  In  the  free  silver  campaign  of  1896  the  average 
price  wa-s  $41.82.  After  numerous  fluctuations,  it  advanced 
to  $12930  in  September,  1902.  In  the  reaction  of  1903 
it  dropped  to  $88.80,  but  in  1906  it  established  a  new  high 


Ms. 


^ 


WILLIAM  ALMY  WHEELOCK 

Banker;  born  in  Providence,  R.  I.,  March  23,  1825;  son  Joseph 
and  Amelia  (Ames)  Wheelock;  educated  at  New  York  University; 
married  in  Buffalo  to  Harriet  Efner.  Has  been  director  of  the 
il  Xational  Bank,  the  American  Surety  Co.,  the  Equitable 
Life  Assurance  Society,  the  Gold  &  Stock  Telegraph  Co.,  and 
prominently  connected  with  other  financial  institutions.  Retired 
from  active  service  in  1864.  Member  American  Fine  Arts 
Society,  the  New  England  Society,  Metropolitan  Museum  of  Art, 
and  of  American  Museum  of  Natural  History,  and  president  of 
Council  of  New  York  University.  Was  president  of  Central 
National  Bank  for  fifteen  years,  resigning  in  1887.  Died  July 
6,  1905. 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE    297 

record  at  $138.36  with  a  subsequent  sharp  decline  in  the 
panic  year  1907. 

The  history  of  the  period  may  also  be  traced  in  the  price  of 
Stock  Exchange  memberships,  or  "seats"  as  they  are  called. 
In  1896  the  price  was  as  low  as  $13,000.  From  this  there 
was  an  advance  to  $80,000  in  I90i,with  a  decline  to $60,000 
in  1903,  and  a  subsequent  rise  to  $95,000  in  1906.  At  the 
latter  price  the  1100  Stock  Exchange  memberships  had  an 
aggregate  market  value  of  $104,500,000.  In  1909  "seats" 
sold  even  higher,  at  $96,000,  but  in  191 1  they  declined  to 
$65,000  and  in  191 3  to  $45,000. 

Likewise  the  record  of  the  total  sales  of  the  Exchange 
revealed  in  large  measure  the  history  of  this  period.  In 
1896  the  total  sales  of  stocks  amounted  to  54,654,096  shares 
or  18,000,000  shares  less  than  in  1879  and  63,000,000  shares 
less  than  in  the  boom  year  of  1881.  But  in  1901  when 
prosperity  again  prevailed,  a  total  of  265,944,650  shares 
was  recorded  and  the  money  value  of  the  stocks  and 
bonds  traded  in  was  over  $26,000,000,000.  During  the  next 
four  years  this  total  was  not  reached,  but  in  1906  the  total 
shares  dealt  in  was  286,006,051  and  the  bond  transactions 
were  $675,377,050,  making  a  total  par  value  of  sales  of 
$29,275,000,000.  When  on  February  11,  1892,  the  day's 
trading  aggregated  1,446,915  shares,  which  for  seven  years 
remained  the  high  record  of  activity  for  one  day,  the 
country  was  amazed.  But  in  1906  there  were  125  days  in 
which  the  sales  exceeded  1,000,000  shares  and  there  were 
three  days  in  which  the  total  exceeded  2,000,000  shares. 
This  activity  was  in  spite  of  the  disaster  of  the  San  Francisco 
earthquake  and  fire  and  the  world-wide  stringency  in  the 
money  market,  the  rate  of  interest,  moving  with  the  higher 
cost  of  living,  having  gone  on  a  higher  level. 

Indeed  at  the  very  time  of  the  enormous  speculation  of 
1906,  business  and  political  conditions  at  home  and  abroad 


298  PROGRESS  OF  THE    EMPIRE   STATE 

were  rapidly  developing  into  one  of  those  great  economic 
crises  which  periodically  arrest  the  industries  of  the  world. 
Early  in  1907  keen  observers  had  begun  to  see  the  signs  of 
approaching  disaster,  and  in  October  the  panic  of  1907 
culminated.  This  was  so  acute  that  the  clearing  houses  of 
the  country  issued  an  aggregate  of  $248,279,000  of  loan  certi- 
ficates, the  issue  in  New  York  alone  being  $101,060,000. 
The  panic  was  attended  with  the  usual  accompaniment  of 
financial  and  commercial  failures  and  was  followed  by  a 
long  period  of  varying  inactivity  in  industry  and  trade, 
lasting  until  1912.  The  volume  of  Stock  Exchange  sales 
of  stocks  declined  to  196,438,824  shares  in  1907  and  to 
127,208,258  shares  in  1911. 

It  should  be  remembered  in  reviewing  the  record  of  the 
Stock  Exchange  that  it  is  its  sensational  side  that  chiefly 
passes  into  history  while  its  great  constructive  work  is  done 
in  comparative  obscurity.  One  hears  of  the  panics,  but 
the  operations  by  which  investment  and  enterprise  are 
brought  together  often  go  unnoticed.  It  is  a  common  say- 
ing in  Wall  Street  that  only  bear  markets  make  news.  Bull 
markets,  on  the  other  side,  make  wealth. 

As  an  institution  the  Stock  Exchange  was  not  concerned 
in  the  movement  for  corporation  reform  which  has  been  the 
commanding  feature  of  governmental  policy  since  1901. 
The  stock  market  was  at  times  severely  strained  by  the 
various  investigations  and  court  proceedings,  the  enforce- 
ment of  the  Sherman  Anti-Trust  Law,  the  enactment  of  a 
railroad  rate  law,  and  the  measures  taken  for  the  establish- 
ment of  fairer  methods  of  competition.  The  collapse  in 
1907,  while  due  chiefly  to  international  money  conditions, 
and  to  the  clashing  of  powerful  financial  interests,  may  be 
attributed  in  part  to  this  contest  between  the  Federal 
Government  and  the  financial  powers  represented  in  some 
of  the  interstate  corporations.     The  concentration  of  capital 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     299 

had  become  so  immense  during  this  period  that  it  seemed 
necessary  to  invoke  the  Federal  power  to  subject  it  to 
reasonable  regulation. 

During  this  memorable  period  when,  as  never  before, 
except  in  Jackson's  administration,  the  political  power  and 
the  financial  power  clashed,  the  sentiment  of  Wall  Street 
was  divided.  Many  condemned  what  they  termed  the 
governmental  interference  with  business,  while  others  sup- 
ported the  popular  demand  for  publicity  and  regulation. 
Without  going  into  the  merits  of  this  controversy,  the  point 
should  be  made  in  behalf  of  the  stock  market  that  while  it 
is  frequently  used  by  unscrupulous  persons,  yet  as  a  market 
it  is  the  freest  in  the  world,  being  open  to  all  on  equal  terms. 
Nowhere  else  is  competition  better  established  than  in  the 
Stock  Exchange,  while  the  Exchange  by  its  rules  and  regu- 
lations tries  to  protect  the  freedom  of  this  competition. 

Since  the  panic  of  1907,  moreover,  important  changes 
have  been  effected  in  the  machinery  of  Wall  Street,  changes 
which  have  strengthened  the  financial  system  and  removed 
many  causes  of  popular  criticism  and  discontent. 

These  changes  include  an  increase  in  the  requirements  of 
publicity,  a  notable  expansion  of  the  membership  of  the 
Bank  Clearing  House,  the  issuance  of  a  more  comprehensive 
bank  statement,  and,  lastly,  a  number  of  amendments  of  the 
rules  and  regulations  of  the  Stock  Exchange  by  which  new 
safeguards  are  provided  both  for  investors  and  speculators. 
Next  to  the  admission  of  the  leading  trust  companies  into 
the  Clearing  House,  the  most  notable  advance  which  has 
been  made  in  the  financial  center  of  this  country  in  recent 
years  has  been  the  improvement  of  the  Stock  Exchange 
system.  This  improvement  was  in  large  part  the  outcome 
of  the  investigation  of  the  speculative  exchanges  made  in 
1909  by  a  commission  appointed  by  Governor  Hughes,  of 
which   commission   Mr.    Horace    White,   the   well   known 


300  PROGRESS  OF  THE   EMPIRE  STATE 

economist,  was  chairman.  This  commission,  while  up- 
holding the  essential  soundness  of  the  Stock  Exchange 
system,  made  a  number  of  criticisms  and  recommendations. 
It  is  to  the  credit  of  the  Stock  Exchange  authorities  that 
they  quickly  carried  out  most  of  the  recommendations,  this 
requiring  many  amendments  to  the  by-laws.  The  most 
important  recommendation  was  that  the  Unlisted  Depart- 
ment should  be  abolished,  and  this,  as  already  stated,  was 
carried  into  effect  early  in  1910. 

On  April  22,  1903,  the  Stock  Exchange  opened  its 
present  building,  which  is  undoubtedly  the  best  appointed 
bourse  in  the  world.  During  its  construction  the  Board 
held  its  sessions  in  the  Produce  Exchange  on  Beaver  Street. 
The  new  building  has  a  frontage  of  137  feet  8>£  inches  on 
Broad  Street,  152  feet  10  inches  on  New  Street,  and  a  narrow 
opening  of  14  feet  2  inches  on  Wall  Street.  It  is  constructed 
of  white  Georgia  marble,  the  style  of  the  architecture  being 
Roman  Renaissance.  The  most  conspicuous  features  of 
the  Broad  and  New  Street  fronts  are  the  high  Corinthian 
columns  and  several  groups  of  statuary  by  John  Quincy 
Adams  Ward.  The  board  room  is  a  magnificent  expanse  of 
I>169,352  cubic  feet.  The  annunciator  boards,  operated  by 
electricity,  which  serve  to  summon  brokers  when  non-mem- 
bers wish  to  speak  to  them,  cover  800  square  feet  and  require 
8000  separate  electric  wires  to  operate.  The  cost  of  the 
building  was  in  the  neighborhood  of  #4,000,000,  and  it  is 
one  of  the  architectural  features  of  the  city. 

There  is  nothing  mysterious  or  complicated  in  the  Stock 
Exchange  system.  It  is  easy  to  understand,  although  it 
requires  a  peculiar  order  of  talent  to  operate  skillfully. 
The  Stock  Exchange  is  an  unincorporated  body  of  1100 
members  engaged  in  the  business  of  buying  and  selling  secu- 
rities either  for  themselves  or  on  specified  commissions  for 
outsiders.     The  objects  of  the  Exchange,  as  explained  in  its 


WILLIAM  ELLIS  COREY 

i;  born  in 

it  the 

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larles 

M.  S>  id  in  [903 

it  and  din 
Is  din  m  Railwa 

i 

member  Ann 
ites  of  Mining  Engineei  ng  clubs. 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     301 

new  constitution  adopted  in  March,  1902,  are  "to  furnish 
exchange  rooms  and  other  facilities  for  the  convenient 
transaction  of  their  business  by  its  members  as  brokers; 
to  maintain  high  standards  of  commercial  honor  and  in- 
tegrity among  its  members;  and  to  promote  and  inculcate 
just  and  equitable  principles  of  trade  and  business." 

From  10  a.m.  to  3  p.m.  dealings  are  permitted  on  the 
floor  of  the  Exchange  in  such  securities  as  the  governing 
committee  has,  after  strict  examination,  admitted.  The 
members  are  prohibited  from  trading  after  hours  or  outside 
of  the  board  room.  There  are  no  calls  of  securities  as  in 
former  days.  The  more  active  stocks  are  assigned  to 
different  designated  positions  or  posts  in  the  board  room, 
and  a  member  wishing  to  buy  or  sell  a  certain  stock  goes  to 
the  position  assigned  to  it  and  announces  his  bid  or  offer. 
Nothing  could  be  more  simple.  All  business  is  done  by 
word  of  mouth,  and  the  oral  contract  is  as  binding  as  a 
written  contract  would  be  outside.  A  broker,  let  us  say, 
offers  to  sell  500  shares  of  Union  Pacific  at  140.  If  no 
buyer  appears  at  that  figure  he  is  forced,  if  he  must  sell, 
to  offer  it  at  ^  of  1  per  cent,  or  139^  and  so  on  by  ^ 
recessions  until  a  bidder  appears.  The  sale  made,  both 
brokers  record  the  transaction  on  pads  which  they  carry,  and 
report  it  to  their  offices.  No  exchange  of  securities  takes 
place  on  the  board.  What  occurs  there  is  a  verbal  promise 
to  sell  and  to  buy.  It  is,  however,  a  real  transaction  and 
involves  an  actual  exchange  of  property  later.  All  offers 
made  and  accepted  are  binding,  and  nowhere  else  in  the 
world  are  such  enormous  obligations  entered  into  by  word 
of  mouth.  The  transactions  may  be  for  "cash,"  that  is  to 
say,  delivery  on  the  day  of  sale,  or  "  regular,"  which  involves 
delivery  in  the  business  day  following  the  sale  or  at  three 
days:  that  is,  delivery  in  three  days,  or  at  buyer's  and  seller's 
options  for  not  less  than  four  or  more  than  sixty  days. 


302  PROGRESS  OF  THE   EMPIRE   STATE 

The  bulk  of  the  transactions  are  "regular."  No  fictitious 
or,  to  use  the  Street  term,  "wash"  sales  are  permitted,  nor 
are  dealings  in  puts  and  calls  allowed,  these  being  con- 
sidered as  mere  bets  on  prices.  All  deliveries  of  securities 
must  be  made  before  2.15  p.m.,  in  lots  of  100  shares  or 
multiples  thereof  in  the  case  of  stocks,  or  of  #10,000  or  multi- 
ples thereof  in  the  case  of  bonds.  Transactions  in  odd 
lots,  however,  take  place  in  considerable  quantities. 

After  the  sale  is  made  in  the  board  room  the  transaction 
is  completed  outside,  either  through  the  Stock  Clearing  House 
or  ex-Clearing  House.  Comparison  or  Clearing  House  slips 
are  exchanged,  and  on  or  before  the  time  fixed  for  delivery 
the  seller  delivers  the  securities  sold  to  the  buyer  or,  if  the 
transaction  goes  through  the  Clearing  House,  to  a  party 
designated  by  the  Clearing  House.  The  securities  bought 
are  paid  for  in  full,  on  delivery,  by  certified  check.  Between 
the  brokers,  therefore,  the  transactions  are  essentially  cash 
transactions.  It  is  in  the  relations  of  the  brokers  to  their 
customers  that  the  principle  of  credit  enters  in.  Any 
reputable  person  who  can  give  a  satisfactory  reference  can 
go  to  a  Stock  Exchange  broker  and,  by  making  a  deposit 
equal  usually  to  10  per  cent,  of  the  value  of  the  securities 
to  be  dealt  in,  can  give  an  order  to  buy  or  sell  such  stocks 
or  bonds  as  he  may  designate.  The  broker,  therefore, 
provides  90  per  cent,  of  the  capital  required  to  carry  on  the 
transaction.  This  he  is  able  to  do  by  the  use  of  his  own 
capital  and  also  by  obtaining  loans  from  banks  or  trust 
companies,  using  the  stocks  or  bonds  purchased  for  his 
customers  as  collateral  for  these  loans.  The  banks  usually 
require  from  the  brokers  a  margin  of  20  per  cent,  on  the 
value  of  the  securities  thus  hypothecated.  The  broker 
charges  his  customer  a  commission  of  ^  of  1  per  cent,  both 
for  buying  and  for  selling,  and  also  interest  upon  the 
amount  of  the  credit  which  he  gives  him. 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE    303 

Although  there  are  fourteen  stock  exchanges  in  the 
principal  cities  of  the  United  States,  the  New  York  Stock 
Exchange  is  the  only  one  which  is  truly  national  in  its 
membership  and  in  the  scope  of  its  transactions.  Every 
section  and  almost  every  industry  of  the  country  is  repre- 
sented on  the  list  of  its  admitted  securities,  while  of  the  590 
firms  identified  with  it,  83  are  in  other  cities.  Of  the  1100 
members,  104  have  their  offices  in  Chicago,  St.  Louis,  Phila- 
delphia, Boston,  Pittsburg,  Buffalo,  Minneapolis,  Rochester, 
Richmond,  Hartford,  Baltimore,  Washington,  Cleveland, 
Kansas  City,  Cincinnati,  Erie,  Detroit,  Newark,  New  Or- 
leans, and  Los  Angeles.  Over  three  hundred  of  the  firms  rep- 
resented in  the  Exchange  maintain  505  branch  offices  located 
in  every  part  of  Greater  New  York,  and  also  in  Berlin, 
Germany;  London,  England;  Paris,  France;  and  in  Montreal 
Toronto,  Ottawa,  and  Hamilton,  Canada;  as  well  as  in  up- 
wards of  one  hundred  different  cities  and  towns  of  the  United 
States.  The  business  of  the  Exchange,  therefore,  comes  from 
all  parts  of  the  country,  as  well  as  from  the  principal  markets 
of  Europe.  It  has  been  roughly  estimated  that  there  are 
on  an  average  of  60,000  persons  trading  in  the  stock  market 
all  the  time,  and  as  the  personnel  of  the  dealers  is  constantly 
changing,  this  means  that  millions  of  people  are  interested 
in  the  stock  market  during  the  course  of  a  year. 

Not  all  of  the  1100  members  of  the  Exchange  act  as 
brokers.  There  is  a  large  body  of  room  traders,  that  is  to 
say,  members  who  trade  for  their  own  account  only.  Then 
there  are  a  number  of  members  who  rarely,  if  ever,  enter 
the  Exchange,  but  who,  as  important  principals,  buy  and  sell 
through  other  members.  By  virtue  of  their  own  member- 
ship they  gain  the  reduced  commissions  charged  to  members. 
There  are  also  many  members  who  do  business  almost 
exclusively  as  brokers  for  other  brokers.  These  are  com- 
monly called  $2  brokers  because  their  commission  in  serv- 


304  PROGRESS  OF  THE   EMPIRE   STATE 

ing  other  members  whose  names  they  "give  up"  amounts 
to  $2  per  ioo  shares.  The  commission  which  the  laws  of 
the  Exchange  establish  for  members  doing  business  for 
non-members  amounts  to  $12.50  per  100  shares. 

Every  important  banking  house  is  represented  by  at 
least  one  of  its  partners  in  the  Exchange,  but  it  is  a  mistake 
to  suppose  that  every  great  name  in  the  financial  world  is 
on  the  membership  roll.  For  instance,  J.  Pierpont  Morgan, 
Jacob  H.  Schiff,  andjames  Speyer  are  not  members,  although 
their  banking  houses  are  represented  and  the  sons  of  Mr. 
Morgan  and  Mr.  SchifF  are  members.  James  R.  Keene, 
for  many  years  considered  one  of  the  most  expert  organizers 
of  stock  market  movements,  is  not  a  member. 

On  the  other  hand,  John  D.  Rockefeller  and  William 
Rockefeller,  who  have  not  in  years  entered  the  Exchange, 
are  members.  The  same  is  true  of  George  Gould,  Edwin 
Gould,  and  Frank  J.  Gould,  sons  of  Jay  Gould.  One  of  the 
most  noted  members  of  the  Exchange  was  E.  H.  Harriman, 
admitted  in  1870,  once  active  as  a  broker  and  trader,  later 
one  of  the  seven  controlling  personalities  in  the  railroad 
world  until  his  death.  It  may  be  said  that  it  was  by  his 
genius  not  only  in  railroad  organization  but  also  in  the 
knowledge  of  the  stock  market  and  its  movements  that  he 
was  able  to  achieve  the  wonders  he  wrought.  Another 
well-known  member  of  the  Exchange  is  August  Belmont 
whose  house  has  for  two  or  three  generations  represented 
the  Rothschilds  in  America.  Edwin  Hawley  was  also  a 
member  until  his  death  in  191 1. 

Although  in  active  board  business  the  Stock  Exchange 
is  essentially  a  young  men's  institution,  there  are  still  names 
on  its  rolls  which  have  been  there  since  1869  or  before. 
Among  these  are  J.  H.  Whitehouse  admitted  in  1857, 
Henry  Clews,  admitted  in  1864,  who  has  been  prominent 
in  the  Street  for  over  forty  years  and  who  has  published 


HISTORY  OF    Mil    NIW  YORK  STOCK  EXCHANGE    305 

a  hook  of  Wall  Street  reminiscences;'  Francis  L.  Eames, 
Janus  Seligman  of  the  well-known  banking  house  of  J.  W. 
Seligman  &  Co.;  E.  C.  Benedict,  known  as  one  of  the 
closest  friends  of  ex-President  Cleveland;  and  also  L.  D. 
Alexander,  J.  M.  Amory,  W.  F.  Bishop,  E.  H.  Bonner,  S.  W. 
Boocock,  A.  M.  Cahoone,  H.  G.  Campbell,  W.  T.  Colbron, 
A.  H.  Combs,  E.  S.  Connor,  G.  F.  Cummings,  Charles  S. 
Day,  E.  A.  De  Mauriac,  W.  B.  Dickerman,  L.  G.  Fisher, 
H.  S.  Germond,  R.  Suydam  Grant,  Charles  Gregory,  W.  S. 
Gurnee,  Albert  J.  Hatch,  Louis  P.  Henop,  John  H.  Jacque- 
lin,  A.  Josephson,  A.  M.  Judson,  W.  B.  Lawrence,  C.  H. 
Leland,  G.  J.  Losea,  R.  P.  Lownsbery,  J.  Edward  Mastin, 
J.  R.  Maxwell,  P.  H.  Minis,  Donald  Mackay,  H.  J.  Morse, 
F.  Nathan,  E.  L.  Oppenheim,  A.  I.  Ormsbee,  S.  M.  Schafer, 
F.  K.  Sturgis,  T.  W.  Thome,  D.  B.  Van  Emburgh,  A.  H.  Ver- 
nan,  W.  B.  Wadsworth,  Joseph  Walker,  and  W.  G.  Wiley. 

That  in  an  institution  limited  to  1100  members,  in  a 
business  involving  such  nervous  strain  and  pecuniary  risks 
as  that  of  the  Stock  Exchange,  there  should  be  found  forty- 
nine  men  who  were  admitted  forty-three  or  more  years  ago, 
one  having  been  admitted  fifty-five  years  ago,  is  certainly 
remarkable.  After  all,  the  physical  strain,  the  pecuniary 
risks  of  legitimate  stock  brokerage  are  not  so  great  as  is 
generally  supposed.  The  number  of  insolvencies,  especially 
in  recent  years,  has  been  extraordinarily  few. 

Among  other  members  of  the  Exchange  known  for  their 
activities  in  various  directions  may  be  mentioned:  A.  S. 
Heidelbach,  of  Heidelbach,  Ickelheimer  &  Co. ;  H.  L.  Higgin- 
son,  of  the  well-known  Boston  house  of  Lee  &  Higginson; 
Rudolph  Keppler,  for  several  years  president  of  the  Ex- 
change; R.  P.  Doremus,  long  chairman  of  the  Clearing  House 
Committee;  Bernard  M.  Baruch,  William  Baylis,  C.  Ledyard 
Blair,  Walton  H.  Brown,  Daniel  Chauncey,  A.  M.  Cahoone, 

'  Twenty-eight  Years  in  Wall  Street. 
20 


306  PROGRESS  OF  THE   EMPIRE   STATE 

Harry  Content,  John  H.  Davis,  W.  M.  Donald,  Jacob  Field, 
F.  S.  Flower,  Ernest  Groesbeck,  A.  E.  Goodhart,  R.  Suydam 
Grant,  C.  I.  Hudson,  Howard  H.  Henry,  Colgate  Hoyt,  C. 
W.  Maury,  T.  L.  Manson,  Eugene  Meyer,  Jr.,  H.  K.  Pom- 
roy,  George  B.  Post,  Jr.,  E.  C.  Potter,  J.  D.  Probst,  F.  L. 
Rodewald,  F.  W.  Savin,  W.  M.  Scheftel,  G.  B.  Schley,  Leo 
Speyer,  Henry  C.  Swords,  James  B.  Tailer,  H.  C.  Taylor, 
Edward  Wasserman,  Louis  Wolf,  Thomas  F.  Woodlock, 
Isidor  Wormser,  Jr.,  L.  Zimmermann,  James  B.  Mabon  and 
R.  H.  Thomas,  formerly  president  of  the  Exchange,  and 
who  holds  the  record  for  length  of  service  in  that  office. 

Few  realize  the  value  of  the  services  performed  by  the 
New  York  Stock  Exchange  in  protecting  the  stock  and  bond 
securities  of  the  country.  Every  stock  and  bond  listed  on 
the  Exchange  is  required  to  be  engraved  in  a  certain  speci- 
fied manner  so  as  to  prevent  forgery,  and  to  be  properly 
registered  so  as  to  prevent  fraud.  The  rules  of  the  Exchange 
governing  admission  to  the  list  specify  a  number  of  im- 
portant requirements,  all  intended  to  protect  investors. 
This  service  alone  entitles  the  Stock  Exchange  to  the  grati- 
tude of  the  investors  of  the  country.  When  it  is  said  that 
from  1888  to  1906  there  were  listed  by  the  Stock  Exchange 
#10,915,000,000,  par  value  of  bonds  and  #9,402,000,000 
par  value  of  stock,  a  total  of  $20,317,000,000  or  an  average 
of  #1,128,000,000  a  year,  some  conception  is  obtained  of  the 
magnitude  of  this  service.  In  191 1,  the  total  of  stocks  and 
bonds  then  admitted  to  the  privileges  of  the  Exchange  was 
#24,374,081,323.  This  was  an  increase  in  nine  years  in  the 
total  of  securities  admitted  to  the  Exchange  of  over 
#9,000,000,000.  The  securities  represented  in  the  Stock 
Exchange  amount  to  four  fifths  of  the  total  securities  in  the 
country,  and  to  nearly  one  fifth  of  the  total  estimated  wealth 
of  the  United  States. 

The  evils  incident  to  a  stock  market  have  led  some  to 


SMELTING  PLANT  AT  GARFIELD,  UTAH 

This  typical  plant  of  tl  can  Smelting  &  Refining  Co., 

situafc  Lake  City,  was  under  constru 

during   thi  905-1906,   and   was   in   actual   operation   in 

Augu  The  principal  product  is  copper  bullion,  of  which 

the  output  is  about  170,000,000  pounds  per  year.  The  number 
of  men  employed  is  about  1200.  This  is  only  one  of  several  plants 
operated  by  the  American  Smelting  &  Refining  Co.  in  different 
parts  of  the  West,  in  Mexico,  and  elsewhere. 


HISTORY  OF   Illi:  NEW  YORK  STOCK  EXCHANGE     307 

propose  the  abolition  by  law  of  the  Stock  Exchange.  Such  a 
proposition  is  inspired  by  ignorance  and  prejudice.  Just 
as  civilization  has  its  dark  slums  and  nameless  crimes  from 
which  barbarism  is  exempt,  so  the  modern  financial  system 
has  its  abuses  and  dangers  from  which  the  older  and  simpler 
system  of  trading  was  exempt,  but  as  we  would  not  exchange 
civilization  with  all  its  evils  for  barbarism,  so  it  would  be 
equally  absurd  to  abolish  the  credit  and  stock  markets 
because  of  their  abuses.  The  panic  which  comes  with 
periodic  and  devastating  power  is  a  product  of  the  modern 
financial  system.  It  is  a  direct  result  of  over-extension  of 
credit  and  over-speculation,  but  we  might  with  just  as 
much  sense  abolish  the  railroad  because  of  the  certainty  of 
accident  at  frequent  intervals,  or  stop  building  cities  because 
of  the  ever-present  peril  of  great  conflagrations,  as  to  abolish 
the  modern  financial  system  of  credit  and  stocks  because  it 
results  about  once  in  every  twenty  years  in  a  world-wide 
financial  crisis  called  "panic." 

All  the  transactions  of  trade  involve  the  taking  of  risks. 
Speculation,  a  term  common  both  to  philosophy  and  busi- 
ness, means  the  making  of  an  investment  involving  large 
risk  with  the  chance  of  large  profit,  this  investment  being 
entered  into,  however,  after  intelligent  consideration  of 
the  risks.  From  the  very  beginnings  of  the  English  and 
French  stock  markets,  speculation  has  been  the  object  of 
attack.  Odium  attached  to  it  not  unlike  that  which  at- 
tended in  the  earliest  days  the  lending  of  money,  which  was 
then  called  "usury."  Governments  attempted  to  regulate 
and  even  to  prevent  it;  and  for  more  than  two  centuries 
the  functions  of  the  stock  market  have  not  been  properly 
understood  and  appreciated.  The  Stock  Exchange  has 
been  for  years  denounced  as  a  gambling  house  and  repre- 
sented as  a  den  of  thieves.  Even  as  recently  as  1906  one  of 
the  highest  officials  in  the  American  government  declared 


308  PROGRESS  OF  THE    EMPIRE  STATE 

that  speculation  in  neither  stocks  nor  lands  contributes  in 
any  degree  to  the  development  of  the  resources  of  our 
country,  to  the  expansion  of  our  trade,  or  to  the  continua- 
tion of  our  industrial  activity.  This  statement  is  a  most 
extraordinary  misconception  and  misstatement.  Never- 
theless it  does  reflect  in  some  degree  the  public  idea  of  the 
place  of  the  Stock  Exchange.  This  idea  is  that  it  performs 
no  great  national  function,  that  it  contributes  in  no  way  to 
the  common  wealth,  and  that  it  is  a  source  of  evil  and  wrong 
by  giving  opportunity  for  gambling.  It  is  no  part  of  my 
task  to  enter  into  an  elaborate  defense  of  speculation  or 
even  give  a  detailed  description  of  the  functions  of  the 
stock  market,  but  it  is  necessary  that  this  subject  should  be 
touched  upon  in  order  to  comprehend  the  history  of  the 
Stock  Exchange  in  its  relation  to  the  development  of  the 
nation.  President  Hadley  of  Yale  University  in  a  recent 
address  said:  "  The  objections  urged  against  modern 
trade  ethics  are  two:  First,  that  modern  trade  in  its 
larger  forms  is  not  an  attempt  to  meet  public  needs.  It  is 
mere  speculation — gambling  or  something  worse.  Second, 
that  fair  competition  does  not  exist  except  when  buyer  and 
seller  are  on  equal  terms.  Much  of  the  present-day  specu- 
lation is  bad.  But  side  by  side  with  the  bad  there  is  much 
that  is  good  and  indeed  necessary.  The  first  essential  in 
right  speculation  is  that  a  man  must  be  really  able  to  make 
good  his  guarantees  as  to  the  future." 

President  Hadley  approaches  pretty  closely  to  the  actual 
truth  and  yet  he  does  not  develop  the  truth  in  its  fullness. 
It  is  not  speculation,  but  the  abuse  of  speculation  which  is 
bad.  The  abuse  of  speculation  is  the  result,  first,  of  entering 
into  large  risks  with  inadequate  capital  and  without  intelli- 
gent observation  of  conditions,  and  this  is  not  speculation  at 
all  but  mere  gambling.  The  result,  second,  of  unfair  me- 
thods of  competition.     The  development  of  the  organized 


HISTORY  OF  THE  NEW  YORK  STOCK  EXCHANGE     309 

stock  market  has  constantly  tended  to  enlarge  the  area  of 
that  publicity  which  is  essential  to  fair  competition,  and 
also  to  the  extension  of  safeguards  against  illegitimate 
overtrading. 

The  Stock  Exchange  provides  a  regulated  market  by 
which  investments  in  corporation  securities  may  be  ex- 
changed. It  is  like  the  bank  and  the  railroad,  really  a  part 
of  the  mighty  system  of  transportation  which  contributes  to 
the  wealth  of  the  world  by  affording  the  facilities  by  which 
production  and  consumption  may  be  brought  together. 
The  stock  market  promotes  that  mobility  of  capital  by 
which  continental  enterprises  are  promoted  and  human 
wants  are  filled.  Its  operations  tend  to  regulate  supply 
and  demand  so  that  the  one  shall  not  be  in  excess  of  the 
other.  It  affords  a  conclusive  test  of  values,  and  its  wide 
publicity  of  quotations  safeguards  investments  and  guaran- 
tees values  in  all  parts  of  the  country.  The  legitimate  specu- 
lation which  takes  place  in  it  has  its  economic  value  in  that  it 
makes  a  continuous  market  in  which  investors  can  instantly 
put  their  surplus  earnings  into  securities  and  as  quickly  con- 
vert their  securities  into  money.  Thus  it  promotes  thrift 
and  enterprise,  and  gives  to  the  commerce  of  the  country  a 
national  leadership  and  community  of  purpose  by  which 
national  life  is  expanded  and  the  national  power  spread  over 
the  globe. 


^^^e^t^^^r^ 


LOUIS  WINDMULLER 

Merchant;  horn  in  Westphalia,  1835;  educated  at  gymnasium 
at  Munster;  emigrated  to  United  States  in  1853;  since  then 
Ql  of  New  York  City,  where  he  became  a  successful  mer- 
chant. Has  been  associated  with,  and  took  part  in  founding  the 
Title  Guarantee  &  Trust  Co.,  the  German- American  Insurance 
the  German  Alliance  Insurance  Co.,  Maiden  Lane  .Safe 
Deposit  Co.,  Bond  &  Mortgage. Guarantee  Co.;  is  director  of  most 
of  these;  is  president  Maiden  Lane  Savings  Bank.  One  of  the 
founders  and  since  1889  treasurer  of  the  Reform  Club;  one  of  the 
founders  and  vice-president  Queensboro  Chamber  of  Commerce; 
managing  director  Board  of  Trade  and  Transportation;  agitated 
successfully  for  improvement  of  our  state  canals;  member 
Chamber  of  Commerce;  and  member  of  number  of  charitable 
institutions,  including  Legal  Aid  Society,  of  which  he  is  treasurer; 
vice-president  of  Heine  Monument  Society;  treasurer  Tree 
Planting  Association;  life  member  New  York  Historical  Society; 
indefatigable  pedestrian. 


CHAPTER  IX 

THE  COMMERCIAL  PROGRESS  OF  GOTHAM 

BY  LOUIS  WINDMULLER 

WITHIN  sixty  years  the  population  of  the  city  of 
New   York    has    increased    from    five    hundred 
thousand  to  five  million  people.      The  foreign 
trade  in  1850  amounted  to: 

Exports $  52,712,789 

Imports 111,123,524 


Total  £163,836,313 

The  foreign  trade  of  New  York  in  1910  amounted  to: 

Exports $651,986,356 

Imports 93S>990.958 


Total  £1,587,977,314 

exports  being  twelvefold,  and  imports  ninefold,  what  they 
were  sixty  years  ago.  The  foreign  trade  of  the  whole  coun- 
try in  1910  amounted  to  three  thousand  and  five  million 
dollars,  so  that  nearly  one  half  of  the  foreign  commerce  of 
the  United  States  passed  through  the  port  of  New  York. 
The  tonnage  of  American  and  foreign  vessels  engaged  in  our 
foreign  trade  was  for  the  port  of  New  York: 

3" 


312  PROGRESS  OF  THE   EMPIRE   STATE 

Cleared 

Year  ending  June  30,  1850 983,478  tons 

Year  ending  June  30,  1910 12,541,903  tons 

Entered 

Year  ending  June  30,  1850 1,145,331  tons 

Year  ending  June  30,  1910 13,042,818  tons 

The  testimony  of  an  eye-witness  to  these  changes,  and 
his  reminiscences  of  men  who  assisted  in  the  development, 
should  be  interesting. 

The  Croton  Reservoir,  which  supplied  the  city,  was  on 
the  site  of  the  Public  Library,  and  had  the  appearance  of  a 
fortress.  Small  as  the  basin  was,  covering  half  a  block,  it 
furnished  water  for  the  whole  city.  Complaints  of  insuf- 
ficient supply  came  only  from  owners  who  had  erected  their 
houses  above  the  street  level.  Around  the  ramparts  of  that 
"fortress"  a  comfortable  walk  was  available  for  pedestrians 
who  did  not  mind  the  ascent  of  an  easy  flight  of  stairs. 

On  many  Sunday  afternoons  we  went  to  view  from  these 
breastworks  the  ground  upon  which  a  greater  city  was  to 
rise.  A  few  structures  only  were  in  sight  to  the  north. 
The  most  conspicuous,  Rutgers  academy  for  the  education 
of  women,  with  its  serpentine  fronts  and  "swell  "  windows, 
occupied  the  block  on  the  east  of  the  Avenue  from  Forty-first 
to  Forty-Second  Street.  St.  Patrick's  Gothic  Cathedral, 
destined  to  become  the  finest  church  on  the  continent, 
was  not  planned — but  Catholics  owned  the  site;  the  flower 
of  their  flock  continued  to  worship  in  Mott  Street.  A 
vast  asylum  absorbed  the  block  on  the  east  side  of  Fifth 
Avenue  between  Fifty-first  and  Fifty-second  Streets;  the 
Union  Club  has  since  erected  a  home  on  the  corner,  and 
the  Vanderbilt    mansions  are  opposite.      Squatters,   with 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        313 

grunting  pigs  and  chattering  geese,  controlled  the  territory 
between  the  Arsenal  and  McGowan's  Pass;  Vaux  and 
Olmsted  have  made  it  the  finest  park  of  which  any  city  can 
boast.  Fifth  Avenue  had  been  lined  with  sombrous  dwellings 
which  reflected  the  brown  study  of  their  occupants.  Many 
continue  to  offend  the  eyes;  others  have  been  changed  into 
shops  of  a  brighter  hue  and  more  attractive  styles.  As 
their  business  increases,  the  thrifty  tenants  will  probably 
transform  this  avenue,  from  Madison  Square  to  the  Park, 
into  an  American  "Rue  de  Rivoli  "  if  avaricious  owners  can 
be  prevented  from  building  too  high  in  the  air. 

Of  the  boroughs  which  were  annexed  in  1898,  Brooklyn 
was  and  remains  the  most  important.  It  is,  as  it  always  has 
been,  a  city  of  homes.  Devoid  of  palaces,  it  is  free  of  slums. 
The  "Heights"  offered  eligible  sites  for  the  dwellings  of 
merchants  whose  business  was  in  lower  Manhattan.  To 
the  benefit  of  good  air  and  the  attraction  of  fine  views,  the 
eloquence  of  Henry  Ward  Beecher  was  added  when  he 
was  minister  of  Plymouth  Church;  other  preachers,  like 
Dr.  Storrs,  contributed  fame  to  the  city  of  churches. 
No  wonder  that  the  families  of  Judge  Pierrepont,  Edward 
M.  Shepard,  Alfred  T.  White,  George  Foster  Peabody,  the 
"Schroeders,"  and  their  friends,  filled  every  available  block 
as  far  as  Clinton  and  Court  Streets.  No  indication  of  de- 
velopment beyond  was  evident.  Here  and  there  Dutch 
farmhouses,  surrounded  by  hotbeds,  remained  the  only 
familiar  signs  of  civilization  until  Prospect  Park  was  laid 
out.  South  Brooklyn,  where  Henry  C.  Murphy  and  J.  S.  T. 
Stranahan  lived,  was  in  bad  repute  on  account  of  malaria. 
Many  localities,  including  the  separate  community  of 
Williamsburg,  suffered  temporarily  from  a  collapse  of  specu- 
lation in  building  lots  which  culminated  during  the  panic  of 
1857. 

A  friend  of  the  writer  had  agreed  with  the  tenant  of 


3H  PROGRESS  OF  THE   EMPIRE   STATE 

one  of  his  houses  on  Bedford  Avenue  to  let  him  remain 
rent  free  until  prosperity  should  enable  him  to  resume  pay- 
ments, but  he  was  surprised  to  see  him  remove  his  furniture 
a  few  days  later.  The  tenant  explained  his  behavior  by 
showing  the  exasperated  landlord  an  offer  of  the  use  of  a 
better  home  for  taking  care  of  it;  but  the  houses  did  not 
go  begging  long.  Ex-Mayor  Kalbfleisch  made  chemicals 
in  the  Eastern  District. 

Staten  Island,  now  the  Borough  of  Richmond,  has 
changed  in  character  less  than  other  annexed  districts. 
It  is  covered  with  unostentatious,  comfortable  homes 
surrounded  by  shrubbery,  and  looks  what  it  is — the  ideal 
spot,  chosen  for  the  dwellings  of  refined  and  happy  families. 
When  we  gaze  at  those  hills,  as  we  glide  through  the  narrow 
channel  which  separates  it  from  Long  Island,  we  appreciate 
why  this  emerald  spot,  the  gem  of  our  port,  was  long  a  bone 
of  contention  between  the  English  and  the  Dutch. 

The  banks  of  the  romantic  Bronx  River,  named  after 
Jonas  Bronck,  a  patroon  from  Germany,  did  not  be- 
come generally  known  until  the  city  acquired  for  parks, 
botanical  and  zoological  gardens,  the  most  attractive  sites. 
Pierre  Lorillard  continued  to  grind,  on  the  shores  of  the 
babbling  brook,  the  pungent  snuff  by  the  sale  of  which,  at 
16  Chambers  Street,  he  made  a  fortune;  and  "Papa" 
Bodouin  had  already  acquired  a  reputation  for  that  Bur- 
gundy wine  which  has  made  his  "Hermitage"  the  popular 
resort  of  Williamsbridge. 

Queens  was  chiefly  visited  by  people  who  wanted  to 
attend  the  races.  A  turnpike  led  from  Paynter's,  whose 
house  was  once  the  scene  of  an  engagement  between  Wash- 
ington's army  and  the  British,  near  Hunter's,  the  sponsor 
of  Hunter's  Point,  to  the  race  course  at  the  second  tollgate. 
The  turnpike  was  named  after  John  C.  Jackson,  who  sold 
job  lots  of  crockery  in  Water  Street.     A  jovial  Englishman 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        315 

with  florid  complexion,  he  married  Captain  Riker's  daughter, 
the  wealthiest  heiress  on  the  island.  After  her  husband's 
death,  she  moved  to  New  Jersey,  and  took  the  colonial 
homestead  she  was  born  and  bred  in  on  "Oakhill,"  piece- 
meal with  her.  Her  daughter  married  J.  L.  Riker,  the 
Cedar  Street  merchant.  From  the  race  course  the  turn- 
pike led  to  St.  Ronan's  well  near  Flushing  Creek.  The 
waters  of  this  spring,  celebrated  for  their  healing  properties, 
had  already  been  used  by  Indians.  A  popular  resort  was 
established  on  the  brow  of  the  hill,  where  guests  continued 
to  enjoy  the  water  with  other  refreshments,  until  specu- 
lators filled  the  spa  and  leveled  the  hillsite. 

John  Aspinwall  resided  in  Flushing,  and  Senator  Rufus 
King  settled  in  Jamaica.  Among  the  fashionable  quarters  of 
New  York  families  in  Manhattan  was  the  Bowling  Green. 
In  181 5  the  ground  which  faced  it  was  sold  for  dwellings  by 
the  government.  A  restriction  that  the  houses  should  be 
of  uniform  size  with  gardens  fronting  the  street  induced 
wealthy  merchants  to  build  there.  Robert  Fulton  lived 
and  died  in  "Marketfield,"  in  that  neighborhood.  The 
light  red  brick  and  white  marble  trimmings,  with  flowers 
and  shrubbery  in  the  front  yards,  long  remained  an  orna- 
ment of  lower  Broadway.  John  Hone  lived  at  the  corner 
of  Whitehall  Street;  Stephen  Whitney,  the  last  one  to  leave, 
was  at  the  other  end,  on  the  corner  of  State  Street.  After 
the  families  vacated,  these  brick  dwellings  were  occupied 
by  the  Oelrichs  for  offices  of  their  Bremen  steamers,  by 
agents  of  the  Cunard  and  French  lines,  and  by  foreign 
consuls.  This  entire  square  has  been  absorbed  by  an  impos- 
ing Custom  House.  Where  our  Knickerbocker  families 
entertained  their  guests,  Mr.  Loeb  scares  their  descendants 
blue  when  he  suspects  them  of  smuggling.  Plebeian  indi- 
viduals who  import  goods  to  sell  are  suspected  by  the 
nature  of  their  calling. 


3l6  PROGRESS  OF  THE   EMPIRE  STATE 

The  neighborhood  of  St.  John's  Park  was  a  center  of 
good  society.  Here  were  the  homes  of  Alexander  Hamilton, 
General  Schuyler,  and  John  Ericson;  the  families  of  the 
Aymars,  and  the  Lydigs  lived  here.  No  vestige  of  the  past 
remains  but  the  old  church,  which  rang  the  curfew  bell  at 
nine  o'clock  when  other  belfries  had  closed,  and  that  seems 
to  be  doomed. 

Gramercy  Park,  founded  by  Samuel  B.  Ruggles,  con- 
tinues as  it  was  when  chosen  by  Samuel  J.  Tilden,  John 
Bigelow,  and  Peter  Cooper  for  their  respective  residences. 
In  Bond  Street,  Washington  Irving,  Dr.  Francis  Fenimore 
Cooper,  and  Julia  Ward  Howe  lived.  On  Washington 
Square  were  the  homes  of  Samuel  F.  B.  Morse,  the  Rhine- 
landers,  and  William  E.  Curtis,  who  lived  in  summer  on 
Staten  Island.  The  gray  stone  building  of  the  New  York 
University  embellished  the  east  side  for  thirty-five  years, 
until  the  college  moved  to  Fordham. 

Dr.  Mott  and  John  Austin  Stevens  lived  on  Bleecker 
Street;  Thomas  Paine  died  there  in  1809.  Jacob  A.  West- 
ervelt,  the  shipwright,  resided  on  East  Broadway  when  he 
was  Mayor  in  1853.  The  families  and  friends  of  Preserved 
Fish  were  grouped  around  Stuyvesant  Square;  Senator 
Evarts's  home  was  on  Second  Avenue  near  Fourteenth  Street 
where  Joseph  H.  Choate,  his  partner,  became  his  genial 
neighbor.  Evarts  would  never  walk  where  he  could  ride; 
he  died  at  83,  having  been  bedridden  the  last  two  years 
of  his  life.  Choate  who  never  rides  where  he  can  walk, 
is  hale  and  hearty  at  eighty-one.  Many  good  people 
owned  charming  brick  cottages  in  Greenwich  Village  and 
Chelsea,  which  included  London  Terrace.  Among  them 
were  George  Bancroft,  Horace  Greeley,  General  Winfield 
Scott,  and  Edwin  Forrest,  who  lived  at  436  West  Twenty- 
second  Street. 

We  can  best  appreciate  the  character  and  location  of  the 


HORACE  BRIGHAM  CLAFLIN 

Merchant;  born  in  Milfi  ,  December  18,  181 1 ;  received 

his  education  in  the  common  schools  and  Milford  Academy. 
Began  business  as  a  clerk  in  his  father's  store,  and  in  1831,  with 
his  brother  and  brother-in-law,  succeeded  to  his  father's  business. 
In  1832,  opened  drygoods  store  in  Worcester.  In  1843,  Horace 
removed  to  New  York  and  organized  the  house  of  Bulkley  & 
Claflin,  wholesale  drygoods,  at  46  Cedar  Street.  After  a 
changes,  due  to  the  rapid  expansion  of  the  business,  Mr.  Claflin  in 
1 85 1  erected  the  Trinity  Building,  at  1 1 1  Broadway.  The  present 
location  of  the  house  on  Worth  Street,  extending  from  Church 
Street  to  West  Broadway,  was  secured  in  1861.  The  Civil  War 
and  the  panic  of  1873  compelled  the  house  to  ask  their  creditors 
for  an  extension  of  time,  but  no  paper  with  their  name  went  to 
protest  and  in  1873  their  notes  were  all  paid  in  three  months, 
sixty  days  before  the  end  of  the  extension.  At  the  death  of  Mr! 
Claflin,  the  business  of  the  house,  which  had  sometimes  reached 
$72,000,000  in  a  single  year,  exceeded  that  of  any  other  such 
house  in  the  world.  Mr.  Claflin  was  a  strong  opponent  of  slavery, 
and  practised  many  unostentatious  charities. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        317 

old  shopping  centers  by  following  thrifty  housekeepers 
as  they  came  from  their  rural  retreats  for  an  expedition  to 
lower  Manhattan.  Usually  the  first  stop  was  made  in 
Canal  Street.  That  wide  thoroughfare,  once  considered 
our  northern  boundary,  had  not  been  opened  farther  east 
than  Broadway.  It  was  expected  that  the  city  would 
turn  this  street  into  a  boulevard,  shaded  by  elms,  and 
stretching  from  river  to  river — a  dream  which  will  never 
be  realized.  The  northern  boundary  of  the  city  has  not 
yet  been  fixed;  it  may  be  Yonkers — named  after  young 
Dutch  bloods,  "Yonge  Heerens,"  who  went  there  to  frolic — 
or  it  may  be  farther  north,  alongside  the  Hudson.  Already 
Broadway  extends  as  a  city  street  to  Yonkers. 

For  ladies  the  chief  attraction  of  Canal  Street  was  the 
dry-goods  store  of  Arnold,  Constable  &  Co.,  on  the  northwest 
corner  of  Mercer  Street,  now  occupied  by  Adams  Express. 
The  firm  had  been  Arnold  &  Hearn.  James  A.  Hearn  left 
to  establish  himself  at  425  Broadway,  when  Mr.  Arnold 
took  his  daughter's  fiance,  Mr.  Constable,  into  partnership. 
George,  the  son  of  James  Hearn,  has  become  a  benefactor 
of  American  artists,  and  a  patron  of  art  museums.  James 
M.  Constable  agitated  for  tariff  revision,  and  was  often 
chosen  "merchant  appraiser"  to  arbitrate  disputes  between 
collectors  and  importers  of  dry-goods,  while  friendly  ad- 
justments of  differences  were  feasible. 

From  Arnold's  ladies  wended  their  way  to  Taylor's 
saloon  on  the  northwest  corner  of  Broadway  and  Franklin 
Street,  the  Ritz-Carlton  of  yore.  Gaudily  decorated,  re- 
splendent with  mirrors,  this  hall  presented  a  gay  spectacle 
at  noon.  Every  plush-covered  "settee"  around  every  table 
was  adorned  by  young  ladies,  who  had  come  to  meet  their 
friends  and  to  gossip  while  sipping  ices.  The  saloon  and 
charming  guests  have  disappeared;  the  building  is  a  toy 
emporium. 


318  PROGRESS  OF  THE   EMPIRE   STATE 

Those  who  had  not  finished  shopping  on  Canal  Street 
were  wont  to  continue  their  promenade  on  the  "dollar" 
side,  as  the  west  of  Broadway  was  called,  until  they  came 
to  Reade  Street.  Here  they  crossed  to  invade  the  marble 
palace  of  A.  T.  Stewart.  This  remarkable  man  had  been 
a  teacher  in  Bragg's  private  school  at  Roosevelt  and  Pearl 
Streets.  When  his  mother  died  in  Belfast,  he  recrossed  the 
ocean  to  claim  £500,  his  share  in  her  estate.  As  he  had 
learned,  during  the  intercourse  with  his  female  pupils, 
what  styles  of  Irish  lace  were  popular,  and  what  prices 
New  York  ladies  had  to  pay,  he  made  a  judicious  selec- 
tion of  the  best  and  brought  them  here  in  place  of 
sovereigns.  He  sold  them  to  good  advantage;  by  strict 
economy,  abstinence  from  debt,  and  close  attention,  he 
became  successful.  He  never  gave  notes,  but  was  always 
ready  to  pay  creditors  who  were  willing  to  allow  the  rebate 
Stewart  claimed.  In  1848,  a  few  years  after  he  had  estab- 
lished himself,  he  was  able  to  build  his  large  store.  Careful 
in  the  engagement  of  help,  he  understood  how  to  secure 
the  most  faithful.  When  examining  applicants,  he  selected 
once  an  artless  lad  because  he  had  observed  that,  on  enter- 
ing, the  youth  had  picked  a  pin  from  the  floor.  No  em- 
ployee was  allowed  to  carry  matches,  and  he  discharged 
one  who  gave  reluctantly  a  box  to  Stewart  himself  when 
he  asked  for  it.  Stewart's  counters  had  to  be  cleared 
after  the  visit  of  every  shopper;  no  piece  of  goods,  no  shawl 
was  allowed  to  remain;  it  had  to  be  put  into  the  creases, 
dusted,  and  returned  to  the  shelf  from  which  the  salesman 
had  taken  it.     No  store  in  the  city  was  more  spick-and-span. 

Some  fifty-three  Novembers  ago,  the  writer  had  occasion 
to  buy  a  trousseau  for  his  bride-elect;  he  went  to  Charles 
C.  Merchant,  287  Broadway,  whose  assortment  of  silks  was 
the  best.  During  a  subsequent  depression  Stewart  managed 
to  buy  of  Merchant's  notes  an  amount  sufficiently  large 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        319 

to  force  him  into  bankruptcy,  and  then  engaged  him  to  buy 
his  silks.  Stewart  was  not  equally  successful  when  he 
tried  by  similar  practices  to  ruin  more  formidable  rivals. 
Yet  his  business  increased;  he  became  a  lavish  contributor 
to  charities,  especially  where  his  munificence  was  likely 
to  command  attention.  The  gifts  which  have  served  his 
purposes  best,  Wv 

He  sent  a  caic,o  ...  food  to  his  starving  countrymen  in 
Ireland. 

He  contributed  to  the  Union  cause  in  1861. 

After  the  German  occupation  of  1870,  he  assisted  the 
needy  artisans  of  Paris. 

He  helped  sufferers  by  the  Chicago  fire  in  1871. 

When  he  died  he  left  an  estate  estimated  at  fifty  millions, 
which  became  a  bone  of  contention  between  clamorous  heirs. 

Indefatigable  shoppers,  who  were  not  quite  satisfied  with 
Stewart's,  turned  east  and  trotted  up  Chatham  Square. 
At  that  time  the  finest  bonnets  were  displayed  in  the 
windows  of  lower  Division  Street, — they  had  to  be  inspected 
and  criticized  before  the  ladies  proceeded  to  Lord  & 
Taylor's  celebrated  store  on  Catharine  Street.  Samuel 
Lord,  an  Englishman,  established  this  firm  early  in  the 
nineteenth  century.  He  lived  in  Newtown  village  on  a 
handsome  estate  which  he  purchased  from  Theodore 
Vietor,  the  genial  Pearl  Street  merchant.  This  old  shopping 
center  has  lost  its  attractions. 

Intercommunication  within  the  city  was  long  restricted 
to  stages,  which  went,  some  from  the  Battery,  some  from 
Fulton  ferry  uptown  over  the  slippery  "Russ"  pavement 
for  which  Jean  Deghuee  and  Charles  Guidet,  his  son-in-law, 
substituted  "Belgian"  granite  blocks.  One  of  the  most 
popular  lines,  the  "Knickerbocker,"  turned  into  Bleecker 
Street,  going  as  far  as  Greenwich  village.  The  "  Bullshead  " 
line   rode   up   the    Bowery   to  Twenty-third    Street.     The 


320  PROGRESS  OF  THE   EMPIRE  STATE 

customary  fare,  sixpence  (6j^c.)  was  handed  to  the  driver 
on  entering,  through  his  observation  Jiole,  whom  passengers 
notified  by  a  pull  of  his  strap  when  they  wanted  to  leave. 
Horse-car  lines  were  opened  as  follows: 

1 85 1,  from  Vesey  Street  up  Sixth  Avenue; 

1853,  from  Ann  Street  up  Third  AvaSt>  •; 

1855,  from  Vesey  up  Hudson  Stre^r  £stl  Eighth  Avenue. 

Stages  being  more  popular,  it  took  time  before  cars  became 
crowded  and  straps  were  needed.  Uptown  branches  were 
of  the  "bobtail"  variety. 

The  first  elevated  road  began  to  run  in  1871  from  the 
Battery  up  Greenwich  Street.  Its  shaky  appearance 
inspired  no  confidence;  few  people  realized  that  this  sys- 
tem of  transportation  would  annihilate  distances  and 
practically  create  New  York."  The  present  means  of 
New  York's  intercommunication  includes: 

101  miles  Subway  tracks, 
213    "       Elevated  tracks, 
1288    "       Surface  trolley  tracks. 

These  are  almost  exclusively  moved  by  electric  power. 
They  carry  over  one  billion  passengers  a  year.  Some 
#250,000,000  has  recently  been  appropriated  to  extend  these 
lines  and  build  new  ones,  in  full  expectation  that  by  in- 
creasing population  and  taxable  values  they  will  prove 
profitable. 

When  passengers  wanted  to  go  to  Philadelphia  by  rail 
sixty  years  ago,  they  left  the  Battery  by  the  steamer  John 
Potter  which  carried  them  to  Amboy.  The  road  took  them 
on  rails  across  the  State  of  New  Jersey  to  Camden,  and  hence 
ferried  them  over  the  Delaware  River  to  the  foot  of  Market 


CLARENCE  WHITMAN 

Manufacture!  talist;  born  in  Annapolis,  No 

!   John  and   Rebecca    (Cutler)  Whitman.     The  Whi 
family  is  of  English  origin,  d  n  John  Whitman  ol 

lOUth,  Mass.,  who  came  from  England  about  1625.    Clai 
Whitman   was   .  in    Cambridge.  d   has   d< 

his  entire  busin  1  drygoods  interests,  first  in  Boston  and 

afterwards  in  New  York  City.  He  began  as  an  employee  of  J. 
C.  Howe  &  Co.  of  Boston,  and  was  later  with  the  firm  of  James 
M.  Beebe  &  Co.  He  came  to  New  York  in  1866  and  was  for 
nine  years  with  J.  S.  &  E.  Wright  &  Co.,  which  was  later  suc- 
i  by  the  firm  of  Wright,  Bliss  &  Fabyan.  He  established 
the  firm  of  E.  C.  &  C.  Whitman  in  the  drygoods  comm 
business,  and  obtained  the  selling  agency  of  the  Ponemah  Mills, 
which  became  the  pioneer  manufacturer  of  white  goods  in  the 
United  States.  The  same  energy  and  perseverance  which  ltd  to 
success  in  this  line  led  him  to  engage  in  the  lace  curtain  industry. 
He  established  the  Wilkes-Barre  Lace  Manufacturing  Co.,  which 
entered  extensively  on  the  manufacture  of  Nottingham  lac 
tains.  Mr.  Whitman  was  five  years  president  of  the  Merchants' 
Association  of  New  York,  is  director  of  the  Pantasote  Leather 
Co.  and  Credit  Clearing  House;  and  member  of  the  New  York 
Chamber  of  Commerce. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        321 

Street,  Philadelphia.     It  took  six  hours  to  complete   this 
journey. 

The  passage  over  the  New  Jersey  Railroad  was  shorter, 
but  once,  in  1861,  it  took  us  longer.  Near  Rahway  we 
drove  into  a  snow  hank  and  had  to  get  some  army  sutlers  to 
shovel  so  as  to  release  the  wheels  of  the  locomotive.  We 
arrived  at  daybreak  in  Germantown.  Compare  the  ferry- 
house  of  the  John  Potter,  with  the  Pennsylvania  Depot  on 
Seventh  Avenue  and  the  Congressional  Express  with  the 
Camden  and  Amboy  train! 

The  Hudson  River  Railroad  Depot  was  covered  sixty 
years  ago  by  a  wooden  shed  in  Hudson  Street,  opposite 
the  grocery  of  Thomas  Hope.  Hence  the  train  was  drawn 
by  teams  to  Thirtieth  Street,  where  it  was  made  up  and 
hitched  to  a  locomotive.  It  took  longer  to  reach  Albany 
than  it  takes  the  Empire  State  Express  train  to  get  to 
Buffalo.  The  new  terminal  of  the  New  York  Central 
speaks  for  itself. 

Railroads  have  done  wonders  for  the  development  of 
our  city.  When  the  neighborhood  of  the  Pennsylvania 
Depot  was  monopolized  by  colored  people  a  brick  house 
and  lot  sold  for  #30,000;  this  property  has  since  been 
leased  for  a  long  term  at  #30,000  a  year.  The  writer 
attended  forty  years  ago  the  golden  wedding  of  his  friend, 
William  Bragaw,  who  related  how  he  negotiated,  when 
married,  for  a  farm.  He  had  the  choice  of  about  a  hun- 
dred acres  each,  one  in  the  heart  of  Williamsburg;  the 
second  around  the  Arsenal  (now  the  menagerie  in  Man- 
hattan) ;  the  third  in  Newtown.  He  chose  the  last  because 
his  relatives  lived  there.  Their  original  name,  "Broucard," 
was  changed  when  they  came  from  France. 

The  value  of  our  real  estate  depends  on  the  convenience 
of  the  location  and  on  the  caprices  of  trade  and  fashion. 
The  old  shopping  center  at  Chatham  Square  ceased  to  be 


322  PROGRESS  OF  THE   EMPIRE   STATE 

reputable  when  it  was  darkened  by  the  structure  of  the  ele- 
vated road.  The  neighborhood  became  infested  with  "  Peter 
Funk"  auctioneers,  bed-house  keepers,  and  other  sharp- 
ers. They  knew  how  to  rope  in  the  passing  stranger,  and 
they  did  not  allow  one  they  caught  to  leave  until  they  had 
stripped  him  of  his  valuables.  The  good-natured  sailors, 
who  had  come  from  their  ships  through  Catharine  from 
South  Street,  considered  this  treatment  a  tribute  which 
every  visitor  had  to  pay,  and  proceeded  without  murmur 
to  less  expensive  quarters.  Passengers  from  New  England 
by  the  Sound  boats  were  more  inquisitive.  They  returned 
with  a  policeman  to  the  spot  where  they  had  been  despoiled, 
generally  to  find  the  place  closed.  Interested  neighbors 
assured  the  guardian  of  peace  that  the  shop  had  not  been 
open  for  months,  and  that  the  stranger  must  be  mistaken. 
But  when  the  robberies  were  repeated,  the  police  closed 
the  fences. 

The  glory  of  South  Street  vanished  with  the  decadence 
of  American  shipping.  While  A.  A.  Low  and  Brothers  im- 
ported tea  from  China,  and  exported  American  products  in 
their  fast  clippers,  more  tonnage  was  covered  on  the  oceans 
by  our  Stars  and  Stripes  than  by  any  other  flag.  Seth  Low, 
the  son  of  A.  A.  Low,  became  president  of  Columbia  College 
and  Mayor  of  the  city.  He  endowed  the  college  with  a  li- 
brary. Amongst  other  China  traders  were  William  H.  Fogg, 
Fletcher  Westray,  and  Talbot  &  Olyphant.  Large  steam- 
ers which  dock  along  the  North  River  from  Christopher 
Street  north,  and  German  lines  landing  in  Hoboken,  carry 
now  the  goods  we  send  across  the  oceans. 

East  Fulton  Street,  Manhattan,  and  lower  Fulton  Street, 
Brooklyn,  were  the  most  crowded  thoroughfares  of  the 
boroughs  until  Roebling's  bridge  supplanted  the  ferries  which 
connected  them.  Both  ferry  and  bridge  are  superseded 
by  tunnels;  which  may  yet  be  replaced  by  airships. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM       323 

The  largest  dry-goods  merchants  were  clustered  around 
Hanover  Square,  near  the  financial  center,  until  they  moved 
west  of  Broadway,  between  Chambers  and  Broome  Streets. 
A  movement  has  been  started  by  these  firms  to  go  uptown 
to  the  east  of  Union  and  Madison  Squares.  Already  we  find 
old  familiar  signs,  which  we  have  long  seen  down  town,  on 
Fourth  and  Madison  Avenues. 

Real  estate  formerly  used  by  the  dry-goods  trade  has 
declined.  Tefft,  Weller  &  Co.'s  old  store,  on  the  east  side  of 
Broadway,  between  Pearl  and  Worth  Streets,  on  the  site 
of  the  old  Broadway  Theater,  sold  for  half  a  million  when 
they  recently  failed;  it  had  been  appraised  at  a  million. 
As  a  tenant,  the  writer  had  some  experience  with  fluctua- 
tions and  elasticity  of  realty  values.  When  we  moved, 
forty-five  years  ago,  from  Maiden  Lane  to  Reade  Street,  we 
were  induced  to  pay  for  lofts  we  continue  to  occupy,  more 
than  they  were  worth.  As  we  found  that  our  landlord 
was  not  as  poor  as  he  looked,  we  were  heartless  enough  to 
force  reductions  of  the  rent  every  year,  until  we  arrived 
at  a  third  of  the  original  price.  Now  the  rent  has  advanced 
again. 

R.  A.  &  G.  Witthaus,  importers  and  makers  of  small 
wares,  came  from  Osnabriick,  Germany,  and  had  their  princi- 
pal office  at  57  Exchange  Place.  Although  their  legitimate 
business  was  lucrative,  they  abandoned  it  to  speculate,  for 
some  time  successfully,  in  real  estate.  The  elder  brother 
was  wont  to  express  his  opinion  that  property  in  Manhattan 
was  safe  enough  to  buy  on  the  smallest  possible  margins. 
When  the  panic  of  1873  made  the  best  mortgages  unavail- 
able Witthaus  could  not  raise  funds  to  pay  interest  and  taxes. 
In  despair  he  laid  down  to  die  in  his  home  near  Judge 
Hilton's.  The  same  real  estate  has  risen  since  far  beyond 
his  sanguine  expectations. 

Some  ten  years  later  a  strong  company,  in  the  organiza- 


324  PROGRESS  OF  THE   EMPIRE  STATE 

tion  of  which  the  writer  took  part,  began  to  search  and  to 
guarantee  titles  to  real  estate.  This  new  departure,  coupled 
with  the  facility  of  obtaining  loans  for  customers  of  the 
company,  has  made  property,  which  had  been  slow  of  sale, 
a  liquid  asset.  The  example  was  followed  by  other  com- 
panies in  other  cities.  The  system  would  have  saved 
Witthaus  and  others,  if  it  had  been  in  vogue  in  their  time. 

The  character  of  settlers  influenced  the  character  of  the 
neighborhood.  The  Irish  once  predominated  at  the  "Five 
Points";  of  the  rowdy  element  among  them,  a  gang  known 
as  "Dead  Rabbits"  made  the  Bowery  unsafe  whenever  they 
invaded  it.  Germans  congregated  on  the  East  Side  as  far 
north  as  Second  Street,  which  was  known  as  "  Klein 
Deutschland."  The  writer  has  watched  long  processions  of 
them  go  down  through  the  Bowery,  Chatham  Square,  and 
Nassau  Street  to  their  respective  workshops,  and  has  seen 
them  return  home  evenings  by  the  same  route.  Automo- 
biles were  unknown,  but  pedestrians  encountered  reckless 
butcher  boys  who  delivered,  in  two-wheel  gigs,  breakfast  in 
the  early  morning,  and  at  all  hours  firemen  who  raced  down 
Chatham  Hill;  as  they  preferred  sidewalks  to  the  prevailing 
cobblestones.  Educated  Germans  comprised  the  best  ele- 
ment of  our  population.  Conscientious  in  the  performance 
of  their  duties  during  the  day,  they  knew  how  to  enjoy 
their  nights.  They  sang  in  the  "Liederkranz,"  danced  in 
assembly  rooms,  and  drank  in  "gemiithliche  Kneipen," 
where  good  beer  was  available.  Besides  teaching  us  harm- 
less pleasures,  they  spread  their  taste  for  art  and  literature. 
Amongst  their  foremost  citizens  were  Carl  Schurz,  Oswald 
Ottendorfer,  and  Charles  Hauselt. 

Since  Germans  assimilated,  they  have  ceased  to  live 
apart.  Since  the  Irish  abandoned  manual  labor  they 
have  become  jurists  and  statesmen.  Prominent  amongst 
them  were  James  T.  Brady,  Chester  A.  Arthur,  Samuel  J. 


tou,  2, 


£><K. 


*3 


ALFRED  VAN  SANTVOORD 

n  manager;  horn  at  Utica,  \.  Y., 

vith  the  Eric  ( 

and  af1  sary  for  him  to 

choos  ound  that  his  natural  inclination  as  well  as 

his  ability  adapted  him  especially  for  th<  of  inland  trans- 

I  a  little  later  steamboats  on  the 
Hudson  River.     During  the  Civil  Wai  r  of  a 

numb  ch,  the  River  Queen,  was  set  apart 

for  the  m  sident  Lincoln  and  Vice-President 

Alexander  II.  Stephens  of  the  Southern 

the  v.  bartered  by  the  govern- 

ment from  Mr.  came  prominently  identi- 

r  the  Civil  War,  securing 
practically  he    Hudson    River    Day    Line 

between  New  York  and  Alban  »ility  and  success  were  so 

it  he  was  by  common  consent  given  the  title  of 
modore. "     He  was  director  of  the  Chicago,  Milwaukee  & 
St.  Paul  Railroad,  t:  Railroads  of  New  Jersey,  the  Dela- 

ware &  Hudson,  and  the  Harlem  Railroad.  He  was  one  of  the 
charter  stockholders  of  the  Lincoln  National  Bank  and  for  many 
years  its  vice-president.     Mr.  Van  Santvoord  died  July  19,  1901. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        325 

Sloan,  Morgan  J.  O'Brien.  Formerly  Italians  settled  at  the 
"Five  Points";  many  remain  near  Paradise  Park  still. 
Later  arrivals  have  chosen  a  district  in  Harlem,  called 
"Little  Italy,"  extending  from  One  Hundred  to  One  Hun- 
dred and  Tenth  Streets.  They  are  thrifty,  frugal,  and  make 
good  citizens.  The  lower  classes  build  roads,  clean  streets, 
and  bore  our  tunnels.  The  most  intelligent  have  become 
manufacturers,  merchants,  and  contractors.  This  does  not 
refer,  however,  to  some  dangerous  elements  who  are  shiftless 
and  quarrelsome.  Greeks,  who  raise  flowers,  and  Syrians, 
who  mend  carpets,  occupy  the  lower  parts  of  West  and 
Greenwich  Streets. 

Heine  said  that  his  ancestors  traded  as  honestly  as 
they  could.  Animosity  against  the  race  was  engendered 
by  prejudice  and  nursed  by  jealousy.  Of  the  behavior  of 
our  Jews  we  have  no  cause  to  complain.  During  our  war 
for  independence,  they  lent  us  money  which  was  never 
repaid.  In  our  civil  war  they  assisted  in  fighting  our 
battles.  Prominent  amongst  later  arrivals  were  Jacob  H. 
SchifT,  one  of  our  foremost  philanthropists;  Louis  Marshall, 
the  eminent  jurist;  Dr.  Abraham  Jacobi,  the  great  physi- 
cian, and  Oscar  S.  Straus,  the  diplomat.  A  majority  of  the 
generation  who  were  born  here  and  many  of  those  who  came 
here  young  are  intelligent  and  worthy.  They  occupy  a  first 
rank  in  schools  and  colleges;  being  shining  examples;  they 
are  held  up  as  such  to  more  conceited,  but  less  ambitious, 
Christian  boys.  But  Jews  who  came  when  they  were 
expelled  from  Russian  ghettos,  after  they  had  passed  the 
best  part  of  their  lives  in  slums,  are  too  old  to  assimilate. 
They  have  spread  over  the  town;  almost  half  a  million  have 
settled  on  the  East  Side  of  Manhattan,  and  in  Browns- 
ville. Of  the  older  types,  the  untrimmed  hair,  long  caftans, 
and  unintelligible  language  render  their  presence  here 
uncouth.     During  the  migration  of  races  in  the  early  days 


326  PROGRESS  OF  THE   EMPIRE   STATE 

of  Christianity,  the  inferior  races  adopted  the  language  and 
habits  of  the  more  intelligent.  As  we  will  not  don  Polish 
costumes  or  learn  their  jargon,  we  expect  these  Jews  in  the 
course  of  time  to  adopt  our  customs.  Meanwhile  Yiddish 
will  be  spoken  on  the  stage  of  the  Bowery  Theater  where 
Malibran  sang  and  Vestris  danced. 

The  difference  between  old-fashioned  city  dry-goods  and 
modern  department  stores  is  striking  enough  to  make  the 
transformation  appear  difficult.  Yet  the  change  was 
accomplished  in  a  simple  way.  R.  H.  Macy  opened  a 
haberdashery  on  Sixth  Avenue,  near  Fourteenth  Street,  in 
1858.  A  shrewd  Yankee,  he  extended  this  business  to  other 
dry-goods,  and  he  absorbed,  one  after  another,  adjoining 
stores.  Amongst  the  additions  to  space,  one  made  in  1888 
gave  the  firm  more  room  than  they  could  utilize  for  dry 
goods.  It  occurred  to  Mr.  Isidor  Straus,  a  junior  partner, 
that  arrangements  for  the  sale  of  the  crockery  of  L. 
Straus  and  Sons,  in  which  Mr.  Straus  was  likewise  in- 
terested, might  result  in  advantage  to  both  firms.  When 
the  partners  of  Mr.  Straus  consented,  they  were  agreeably 
surprised  to  find  how  well  their  underwear  harmonized  with 
toilet  sets  from  Warren  Street.  The  sales  of  dry  goods  and 
china  increased  simultaneously.  The  success  led  to  addi- 
tions of  other  departments — books  and  stationery,  shoes, 
hats,  wines,  and  groceries.  Macy's  example  was  followed. 
More  than  thirty  human  beehives,  called  department 
stores,  exist  here  now,  the  most  successful  being  within 
a  mile  of  Greeley  Square,  the  shopping  center  of  Manhattan. 
Mr.  Straus,  elected  to  Congress  in  1893,  assisted  William  L. 
Wilson  in  framing  the  tariff  which  bears  his  name.  He 
was  an  able  financier  and  great  philanthropist,  but  he  dis- 
claimed credit  for  the  creation  of  department  stores,  an 
achievement  which  should  make  his  name  famous  in  the 
annals  of  commercial  history. 


I  III.  COMMERCIAL  PROGRESS  OF  GOTHAM        327 

To  the  advantage  in  furnishing,  under  one  roof,  every 
want  of  every  family,  is  added  the  pleasure  that  women  have 
opportunities  of  seeing  the  selections  by  other  women  from 
a  great  variety  of  goods.  Owners  vie  with  each  other  to 
offer  the  greatest  attractions.  Some  have  added  butcher's 
stalls  to  their  grocery  departments;  all  of  them  keep  nur- 
series for  children,  give  afternoon  teas,  and  show  moving 
pictures.  One  has  been  venturesome  enough  to  advertise 
a  sparring  exhibition  by  professional  prize  fighters,  which 
was  well  attended  by  women.  A  few  have  arranged  banking 
departments  for  deposit  accounts;  they  take  care  of  their 
customers'  money,  and  allow  them  to  draw  checks  for 
purchases  at  their  counters. 

The  pious  successor  of  Mr.  Stewart  has  added  a  roomy 
auditorium,  where  ladies,  seated  in  comfortable  pews,  may 
listen  to  sweet  strains  of  music,  while  praying  for  the 
bargains  they  desire.  The  exquisite  taste  of  his  window- 
dressing  is  the  delight  of  every  woman  who  passes  with 
longing  eyes.  This  art  was  unknown  fifty  years  ago.  At 
the  occurrence  of  closing  sales,  bargain  hunters  tumble  over 
each  other  to  reach  the  designated  counter  before  their  rivals, 
— generally  to  find  that  some  other  woman  has  been  there 
already.  The  mere  man  who  dares  on  such  days  to  enter 
and  brave  the  gentle  pressure  of  covered  steel  corsets  is  apt 
to  retreat  through  a  maze  of  petticoats  quicker  than  he 
came;  even  on  ordinary  days,  the  single  man  who  ventures 
into  these  crowds,  may  get  himself  into  trouble. 

This  revolution  in  the  retail  business  has  caused  the 
establishment  of  dealers  who  cater  to  wants  of  department 
buyers.  They  are  called  "catalogue"  firms,  because  they 
mail  lists  of  the  bargains  they  can  offer  to  the  firms  they 
solicit,  adding  liberal  samples.  Some  cut  up  the  contents  of 
entire  cases  of  dry  goods  for  that  purpose.  The  outgoing 
and  incoming  mail  of  these  firms  employs  hundreds  of  busy 


328  PROGRESS  OF  THE   EMPIRE   STATE 

women.  Great  as  the  expense  is,  the  business  is  successful. 
By  offering  what  is  needed  they  save  time  and  money  to 
their  busy  customers. 

In  1858,  one  hundred  and  eighty  jobbing  firms  estab- 
lished in  this  city  were  the  regular,  almost  exclusive,  custom- 
ers of  mill  agents  and  of  importers.  These  jobbers  sold 
to  retailers  and  country  merchants,  who  came  twice  a  year 
to  replenish  their  stocks.  The  salesman  of  the  jobbing 
house  who  was  delegated  to  take  charge  of  the  customer, 
from  the  time  he  arrived  to  the  day  of  his  departure, 
had  a  program  for  each  day's  entertainment  prepared: 
Luncheon  at  Clark  &  Brown's,  or  the  Auction  Hotel 
on  Water  Street;  dinner  at  the  old  Astor,  at  Sieghortner's 
on  Hanover  Square,  or  the  "Florence"  on  Walker  Street. 
After  a  visit  to  Barnum's,  Christie's  Minstrels,  or  Niblo's,  a 
good  supper  at  the  Maison  Doree  on  Union  Square  finished 
the  round  of  that  day's  pleasure.  Important  customers 
were  invited  to  the  private  house  of  one  of  the  partners. 

These  jobbers  have  become  superfluous;  their  profits 
have  ceased  to  be  a  burden  since  importers  and  mill  agents 
now  sell  direct. 

There  remains  little  difference  between  importers  and 
domestic  commission  merchants.  Since  high  duties  have 
restricted  imports,  many  of  the  former  have  added  domes- 
tic to  foreign  business.  By  liberal  advances  and  a  gradual 
reduction  of  commissions,  they  have  taken  from  New  Eng- 
land men,  who  had  a  monopoly,  some  of  their  best  accounts. 
Mill  agents  have  reduced  their  charges  and  the  dry-goods 
commission  business  has  become  "commercial"  banking. 
Safe  large  agencies  are  handled  for  one  per  cent,  where  three 
per  cent,  was  considered  reasonable.  This  stimulus  has 
increased  business.  The  annual  sales  of  some  of  these 
"bankers"  reach  thirty  millions.  Since  importers  have 
become  interested  in  domestic  goods  they  have  ceased  to  be 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM       329 

lice  traders,  or  tariff  reformers;    many  have  turned  pro- 
tectionists. 

Barclay  &  Livingston,  24  Beaver  Street,  were  the 
successors  of  Henry  &  George  Barclay.  Anthony  Barclay, 
the  third  brother,  was  appointed  British  Consul  in  181 2. 
The  firm  had  been  for  many  years  agent  of  Lloyd's,  Under- 
writers. A  junior  partner,  Mr.  Mackay,  attended  to  the 
insurance,  and  Mr.  Schuyler  Livingston  to  the  general 
business  of  the  firm  since,  in  1824,  he  became  of  age  and  was 
admitted.  Few  men  have  done  more  to  sustain  the  reputa- 
tion and  uphold  the  credit  of  our  mercantile  community. 
Schuyler  Livingston  would  give  no  credit  to  a  man  who  had 
once  failed.  His  explanation  was  that  the  merchant  who 
permitted  himself  to  become  insolvent  could  no  more  be 
trusted  than  the  woman  who  had  lost  her  virtue.  Yet 
many  women  and  some  men  have  more  than  redeemed 
their  reputation. 

Wilson  G.  Hunt,  a  cloth  jobber  of  the  old  school  at 
80  William  Street,  was  compelled  to  suspend  when  the  crisis 
of  1857  overtook  him.  He  paid  to  every  creditor  every 
cent  with  interest,  and  acquired  another  fortune.  But 
the  incident  had  made  him  timid.  When  a  subsequent 
greenback  craze  alarmed  him,  he  turned  his  assets  into 
gold  and  locked  the  proceeds  in  a  safe  deposit  company. 
Henry  Clews,  his  favorite  clerk,  remained,  during  the  panic, 
his  staunch  friend.  F.  S.  Winston,  another  jobber,  made 
a  failure  of  dry  goods  at  60  Cedar  Street.  When  he  was 
elected  President  of  the  Mutual  Life  Insurance  Company,  he 
became  the  most  efficient  manager  this  company  ever  had. 

Levi  P.  Morton  came  here  from  Boston,  after  be- 
ginning in  a  country  store  in  Hanover,  and  established  him- 
self with  George  B.  Grinnell  in  1854  as  dry-goods  jobber  at 
57  Park  Place,  under  the  name  of  Morton  &  Grinnell.  The 
firm  failed  in  1861  and  settled  at  50  per  cent.,  but  in  1863 


330  PROGRESS  OF  THE   EMPIRE   STATE 

they  were  able  to  pay  every  creditor  in  full  with  interest. 
Since  then  Mr.  Morton  has  been  senior  partner  of  the  suc- 
cessful banking  house  of  Morton,  Bliss  and  Company, 
Governor  of  the  State  of  New  York,  Ambassador  to  France, 
Vice-President  of  the  United  States,  and  President  of  the 
Morton  Trust  Company.  He  lives  at  Rhinebeck,  and  his 
genial  face,  wearing  the  familiar  smile  it  wore  fifty  years 
ago,  continues  to  be  seen  at  public  functions. 

Amos  R.  Eno,  130  Pearl  Street,  was  not  alone  a  shrewd 
dry-goods  dealer,  but  a  successful  operator  in  real  estate  as 
well.  When  he  needed  money  to  finish  the  Fifth  Avenue 
Hotel  in  1857 — (it  was  called  "Eno's  folly,"  because  the  site 
was  so  far  uptown) — his  bankers  rejected  as  collateral  the 
triangular  lot  on  which  the  "Flatiron  Building"  stands 
and  lent  Eno  the  money  without  security. 

When  the  South  attempted  to  secede  in  i860,  South- 
ern statesmen  predicted  that  grass  would  grow  in  Wall 
Street,  and  Southern  merchants  refused  to  pay  debts  they 
owed  to  Northern  creditors,  especially  to  those  who  had 
favored  the  abolition  of  slavery.  There  were  decided 
differences  of  opinion  among  our  citizens.  Southern  sym- 
pathizers were  called  "copperheads."  The  writer  knew  a 
prominent  merchant  and  influential  deacon  who  would 
allow  no  United  States  flag  over  the  porch  of  his  Brooklyn 
church.  The  church  split  and  failed  in  consequence. 
Fernando  Wood,  Mayor  of  the  city  in  1858,  and  reelected 
in  i860,  seriously  proposed  in  1861  that  the  islands  of 
Manhattan,  Long  Island,  and  Staten  Island,  which  now 
constitute  the  greater  city,  combine,  secede  from  the  State, 
and  from  the  United  States,  and  form  "the  free  and  in- 
dependent port  of  New  York,"  following  the  examples  of 
Hamburg  and  other  Hanse  towns  of  Germany. 

The  firm  of  Bowen  &  McNamee,  dry-goods  jobbers, 
had  moved  from  112  Broadway  to  their  new  marble  build- 


y^J^ 


WILLIAM  BACKHOUSE  ASTOR 

Capitalist;  born  in  New  York,  September  19,  1792;  educated 
in  the  public  schools  and  in  Universities  of  Heidelberg  and 
Gottingen.  On  his  return  to  New  York  at  the  age  of  twenty -three, 
engaged  with  his  father  in  the  China  trade  under  the  title  of 

Jacob  Astor  &  Son.  In  1827,  the  American  Fur  Co.  was 
formed  with  William  B.  Astor  as  its  president.  Became  chief 
heir  of  John  Jacob  Astor  on  his  death  in  1848,  and  devoted  him- 
self thereafter  to  the  management  of  the  Astor  properties.  He 
added  to  the  bequest  of  his  father  for  the  Astor  Library  $250,000, 
and   subsequently  presented  additional  land  for  the  building. 

ted  largely  in   real  estate  1  itral   Park,   between 

Fourth  and  Seventh  Avenues,  which  rapidly  increased  in  value. 
For  about  thirteen  years,  prior  to  1873,  was  engaged  in  erecting 
buildings  on  his  vacant  land  and  was  reputed  in  1 868  to  own  more 
than  700  houses,  in  addition  to  investments  in  railroad,  coal,  and 
insurance  companies.     Died  in  New  York,  November  24,  1875. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM       331 

ing  at  320  Broadway,  corner  of  Pearl  Street,  when  the  war 
broke  out.  They  were  one  of  the  first  to  suspend.  Bowen 
devoted  his  attention  to  the  publication  of  the  Independent. 
His  kinsman,  Arthur Tappan, was  wont  to  say:  "Our  goods — 
not  our  principles — are  for  sale."  H.  B.  Claflin  &  Co.,  who, 
under  the  name  of  Claflin,  Mellen  &  Co.,  had  begun  to  import 
and  to  manufacture,  besides  dealing  in  dry  goods,  moved  at 
that  time  from  the  roomy  basement  of  in  Broadway  to 
their  vast  building  on  Worth  Street.  The  impossibility 
of  collecting  from  Southern  customers  forced  them  to 
suspend.  They  compromised  for  70  per  cent,  in  notes, 
giving  creditors  the  option  of  taking  50  per  cent,  in  cash 
instead.  Within  a  few  years  they  paid  in  full  with  interest, 
not  alone  those  who  had  compromised  for  70  per  cent.,  but 
the  rest  of  their  creditors,  who  had  released  them  for  50  per 
cent,  as  well.  John  Claflin,  the  worthy  successor  of  Horace, 
follows  in  his  father's  footsteps;  he  has  extended  the  business 
far  beyond  the  most  sanguine  expectations  of  his  friends,  and 
occupies  amongst  merchants  a  foremost  rank. 

Some  enterprising  dealers  went  South  to  collect  their  out- 
standing accounts  personally.  The  writer  knew  a  Union 
Democrat  who  by  these  means  succeeded  in  getting  for  his 
claims  Southern  produce,  which  he  forwarded  to  his  New  York 
friends  for  safekeeping.  Instead  of  going  home,  he  then 
tried  to  convince  everybody  who  wanted  to  listen  that  the 
South  had  no  right  to  secede  without  our  consent.  He 
made  himself  obnoxious  so  that  he  finally  landed  in  Libby 
Prison,  where  he  lingered  some  time.  When  he  escaped  and 
came  back,  he  found  his  goods  in  a  Brooklyn  warehouse. 
His  Sea  Island  cotton  brought  a  dollar  a  pound,  his  rosin 
ten  dollars  a  barrel. 

The  merchants  who  escaped  the  risk  of  fluctuations  by 
selling  on  commission  were  seldom  troubled.  Seth  M. 
Milliken  from  Maine  established  himself  in  New  York  in 


332  PROGRESS  OF  THE   EMPIRE  STATE 

1866  with  Mr.  William  Deering  as  a  commission  merchant 
in  domestic,  chiefly  cotton,  fabrics.  The  firm  was  success- 
ful, not  for  themselves  alone,  but  for  their  principals  as 
well.  Practically  all  the  mills  they  represent  have  become 
prosperous.  Mr.  Milliken  is  one  of  the  trustees  of  the 
Bowery  Savings  Bank,  the  New  York  Life  Insurance  Co., 
and  is  connected  with  other  institutions.  But  he  rendered 
to  our  community  the  greatest  service  during  the  panic  of 
1907,  when  he  took  charge,  as  president,  of  the  Mercantile 
National  Bank.  It  had  been  well  nigh  ruined  by  specu- 
lators until  Mr.  Milliken  practically  saved  it.  As  soon  as  the 
bank  was  out  of  danger,  Mr.  Milliken  resigned  as  president. 
A  strong  advocate  of  our  protective  system,  he  served  as 
Republican  presidential  elector  in  1892,  and  was  a  personal 
friend  of  Speaker  Reed,  called  "the  Czar." 

Among  important  domestic  houses,  Bliss  &  Fabyan, 
successors  to  Wright,  Bliss  &  Fabyan,  belong  to  the  most 
notable.  Cornelius  N.  Bliss,  the  senior  partner,  an  ardent 
protectionist,  was  a  leader  in  the  Republican  Party,  treasurer 
of  their  campaign  fund,  and  Secretary  of  the  Interior  under 
William  McKinley.  His  ability  is  demonstrated  by  the 
standing  of  the  institutions  which  invited  him  to  become 
a  director — Fourth  National  Bank,  Central  Trust  Co., 
Home  Insurance  Co.  He  was  a  liberal  contributor  to 
charities.  Even  among  his  opponents  in  politics  he  was 
popular. 

The  firm  of  Faulkner,  Page  &  Co.  was  established  in 
1834  by  Thomas  Tarbell  and  Charles  Faulkner,  under  the 
title  of  Thomas  Tarbell  &  Co.  Mr.  Tarbell  withdrew  in 
1850,  and  the  new  firm,  Faulkner,  Kimball  &  Co.,  was 
formed,  consisting  of  the  same  Mr.  Faulkner,  Day  Kimball, 
and  Robert  C.  Billings.  They  continued  until  i87i,when 
Mr.  Kimball  died.  Faulkner,  Page  &  Co.,  their  successors, 
included  Henry  A.  Page  and  Robert  S.  Kendall.    Edward  D. 


I  III-  COMMERCIAL  PROGRESS  OF  GOTHAM        333 

Page,  now  senior  partner,  devotes  his  time  to  the  Merchants' 
Association  and  other  useful  civic  bodies. 

Kohlsaat  Bros,  were  yarn  importers  at  48  John  Street. 
The  daughters  of  John  C.  married  well,  one  becoming  the 
wife  of  Carl  Schefer,  successor  to  Loeschick,  Wesendonck 
&  Co.  Mr.  Otto  Wesendonck,  predecessor  of  Kutter, 
Luckemeyer  &  Schefer,  came  to  New  York  in  1835  as 
representative  of  Metzger  &  Dc  Barry,  an  old  firm  in  Elber- 
feld.  Mr.  Wesendonck  met  Mr.  William  Loeschick,  and 
formed  with  him  a  copartnership  under  the  name  of  Loe- 
schick &  Wesendonck.  They  established  themselves  as 
importers  at  40  Broad  Street,  and  became  agents  for  some 
of  the  best  woolen  and  silk  manufacturers  of  Europe.  Mr. 
Wesendonck  retired  from  the  mercantile  direction  of  the 
New  York  house  in  1858.  It  was  due  to  his  foresight  and 
financial  sagacity  that  the  firm  accumulated  a  fortune. 
Honorable  in  their  dealings,  they  left  an  enviable  reputation. 
Mr.  Wesendonck  went  first  to  Zurich,  where  for  some  time 
he  continued  to  attend  to  the  European  interests  of  the 
firm.  His  wife,  Mrs.  Mathilde  Wesendonck,  a  charming 
and  intellectual  lady,  attracted  to  their  handsome  villa  in 
Zurich,  built  by  Professor  Semper,  the  literary  and  artistic 
celebrities  of  Europe,  including  Richard  Wagner,  who  was 
welcome  wherever  the  Wesendoncks  made  their  home. 
Mathilde  wrote  five  stanzas  for  the  text  of  Tristan.  Hugo 
Wesendonck,  Otto's  younger  brother,  came  here  in  1849, 
and  founded,  with  other  merchants,  the  Germania  Life 
Insurance  Co.,  which  has  been  remarkably  successful. 
He  had  been  a  member  for  Diisseldorf  of  the  German 
Parliament  in  Frankfort  on  the  Main,  and  of  the  "Reichs- 
tag" in  Berlin;  he  followed  here  the  liberal  tendency 
which  prompted  his  policy  abroad. 

When  Mr.  Emil  Oelbermann  came  in  1859,  he  entered  the 
firm  of  Mr.  John  W.  Jung,  6  William  Street,  to  whom  he 


334  PROGRESS  OF  THE   EMPIRE   STATE 

brought  the  agency  of  his  father,  a  cloth  manufacturer  on 
the  Rhine.  Mr.  Noel,  also  from  Cologne,  followed  to  form 
with  him  a  copartnership  under  the  name  of  Noel  &  Oelber- 
mann,  Christoph  Andreae  and  another  house  in  Rhenish 
Prussia  joining  as  special  partners.  This  firm  became  the 
successor  of  Mr.  Jung.  Mr.  Oelbermann  was  trustee  of 
the  German  Savings  Bank  and  of  the  Title  Guarantee  & 
Trust  Co.  He  founded  in  1872  the  German-American  In- 
surance Co.,  remaining  president  to  the  time  of  his  death. 
The  remarkable  prosperity  of  this  company  is  largely  due 
to  Oelbermann's  financial  policy.  His  success  must  be 
attributed  to  his  clear  perception  of  the  capacity  of  the 
clerks  and  partners  with  whom  he  surrounded  himself,  and 
to  his  liberal  treatment  of  those  who  served  him  well.  It 
gave  him  pleasure  to  consult  the  graybeards,  who  were  his 
faithful  lieutenants,  and  whom  he  treated  as  friends  rather 
than  subordinates.  Mrs.  Oelbermann,  his  widow,  inherited 
his  fortune.  She  occupies  the  finest  house  in  Cologne,  and 
devotes  her  time,  energy,  and  money,  to  benefit  meritorious 
Christian  charities.  Louis  F.  Dommerich,  Mr.  Oelbermann's 
partner,  became  his  able  successor. 

The  Irish  ladies  who  sold  red  apples  in  City  Hall  Park 
also  disposed,  at  a  penny  apiece,  of  copies  of  popular  ballads 
which  were  strung  over  their  stands  and  which  were  sung 
in  the  "free  and  easies"  during  evening  entertainments. 
Prominent  singers  were  called  upon  as  leaders  to  oblige  the 
guests  who  joined  the  chorus. 

Here  is  a  specimen: 

JOHN  DEAN  AND  HIS  OWN  MARY  ANN 

(Sung  after  the  melody,  "Villikin  and  his  Dinah.") 

'T  is  of  a  rich  merchant  who  in  Gotham  did  dwell 
He  had  a  fair  daughter  who  cut  a  great  swell. 
Marianna  Petronella  this  fair  one  was  called 


EMIL  OELBERMANN 

Mr  rn  in  Lennep,  Germany,  August 

17,  1835.  lerica  in  1859  and  entered  fin 

W.Jue  terman 

joined  by  Mr. 
and  a  firm  partnership  was  established  under 

John  W.  Jung.     Mr.  Oelbermann  -man- 

American  Insurance  1   until  his 

death.     Hi  G   rman  Alliance  Insurance 

Bank,  the  German 
Savings  Bank,  the  Title  Guarantee  &  Trust  Co.  Died  in  Cologne 
May  1, 1S97. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM       335 

She  had  a  large  fortune  in  rum,  Schnaps,  and  -old; 
This  daughter  was  walking  in  the  stable  one  day, 
A-smelling  the  sweet  savor  of  horses  and  hay, 
Her  lover  the  coachman  unto  her  he  said, 
"Now  let  us  go  right  off  and  get  married." 

John  G.  Boker  was  a  liquor  importer  at  93  Front  Street. 
The  house  became  famous  by  the  bitters  which  Mr.  Ludwig 
Funke,  Jr.,  prepared.  The  firm  was  in  John  Street  when 
the  elopement  took  place;  which  gave  rise  to  the  above 
doggerel. 

The  other  prominent  wine  importers  were: 

P.  Harmony  &  Nephews,  63^  Broadway,  Sherries 

Renauld  &  Francois,  23  Beaver  St.,  Champagne 

Daniel  St.  Amant,  41  William  St.,  Claret 

Edward  Lamontagne,  58  New  St., 

M.  Lienau  &  Co.,  2  Jones  Lane, 

Hagemeyer  &  Brunn,  Beaver  St.,  Port  Wine 

Most  of  these  firms  were  engaged  as  merchants  in  other 
branches  of  business  as  well.  St.  Amant  was  a  large  im- 
porter of  French  prunes,  grown  and  prepared  in  California, 
this  fruit  is  exported  now.  J.  W.  Brunn  took  an  active  in- 
terest in  the  "Isabella  Heimath,"  a  fine  retreat  for  indigent 
old  couples  on  Amsterdam  Avenue. 

The  firm  of  Frederick  Vietor  &  Achelis  consisted  of  Mr. 
Thomas  Achelis,  who  came  from  Bremen  in  1837,  and 
formed  with  Mr.  I.  Wichelhausen  a  copartnership,  which 
lasted  only  until  1839,  when  Mr.  Achelis  associated  himself 
with  Mr.  Frederick  Vietor,  his  brother-in-law.  Mr.  Fred- 
erick Vietor,  had  in  1829  already  come  from  Hesse.  He  was 
first  engaged  as  clerk,  then  as  partner,  by  Charles  Graebe 
at  36  Exchange  Place,  whom  he  left  to  form  the  copartnership 
with  Mr.  Achelis  in  1839.     While  they  were  at  9  South 


336  PROGRESS  OF  THE   EMPIRE   STATE 

William  Street  and  61  Stone  Street, — the  building  now 
occupied  by  the  Reform  Club, — they  imported  German 
hosiery  and  woolens,  and  did  a  comparatively  small  business. 
They  lived  alternately  in  Bremen  to  attend  to  their  European 
interests.  The  partner  who  was  here  lived  at  175  Henry 
Street,  Brooklyn.  A  trait  of  the  Vietors  was  energy  and 
briskness,  that  of  the  Achelis  family  was  kindness — the 
perfume  of  politeness.  The  firm  had  moved  to  Duane 
Street  before  the  two  founders  died,  when  George  Frederick 
Vietor,  son  of  the  senior,  assumed  management.  His 
energy  placed  this  firm  in  the  foremost  rank  of  merchants. 

Gustavus  Hessenberg  came  from  Frankfort  on  the  Main 
in  1838.  After  remaining  a  short  time  at  9  Old  Slip,  he 
established  himself  as  importer  of  dry  goods  at  3  William 
Street.  In  1851  he  formed  a  connection  with  the  old 
Hamburg  house  of  C.  A.  AufTmordt  &  Sonne,  under  the 
firm  name  of  AufTmordt,  Hessenberg  &  Co.,  119  Broadway, 
while  AufTmordt,  Sturmer  &  Co.  conducted  the  Paris 
business.  The  present  senior  partner,  Mr.  John  F.  Degener, 
a  very  conservative  gentleman,  joined  the  firm  in  1861. 
Mr.  Kessler,  from  Hamburg,  a  relative  of  Mr.  AufTmordt, 
was  admitted  as  partner  in  1864.  He  was  a  polished  gen- 
tleman, who,  by  the  suavity  of  his  manners  and  his  unremit- 
ting vigor,  greatly  promoted  the  firm's  business.  His 
convivial  spirit  made  him  as  popular  in  the  fashionable 
circles  of  Paris  as  he  was  here.  The  family  was  knighted 
by  Emperor  Maximilian  II,  and  after  the  Franco-Prussian 
War,  William  von  Kessler  was  made  a  count  by  the  Em- 
peror. He  died  a  few  years  ago  in  his  prime.  His  wife,  a 
charming  lady,  his  son,  Count  Harry  Kessler,  and  his 
daughter,  the  Marquise  de  Brion,  survive  him. 

The  house  of  Iselin  originated  by  the  establishment  of 
Messrs.  Moran  &  Iselin  from  Bale,  in  1840,  at  123  Pearl 
Street,  as  importers  and  merchants.     In  1847  they  moved 


Mil    COMMERCIAL  PROGRESS  OF  GOTHAM       337 

to  47  Broad  Street.  Among  their  European  correspondents 
were  large  holders  of  Erie  Railroad  securities.  When  this 
road  failed  in  1S57,  Moran  was  first  made  receiver  and 
afterwards  president.  Adrian  Iselin  continued  the  import- 
ing business  until  he  was  succeeded  by  his  junior  partners. 
He  continued  as  a  special  partner,  however,  while  the  firm 
name  changed  successively  to  Cottenet  &  Barbey,  Henry 
Barbey  &  Co.,  Richard,  Iselin  &  Co.,  and  Iselin,  Neeser 
&  Co.  In  1890  the  present  firm  of  William  Iselin  &  Co., 
consisting  of  William  E.  Iselin,  Alfred  Vondermuhl,  and 
James  W.  Cromwell,  was  established.  More  recently, 
Mr.  Cromwell's  son  Lincoln,  and  Mr.  Iselin's  son  Arthur, 
became  partners.  They  rank  amongst  our  foremost  im- 
porters. Adrian  Iselin,  Sr.,  has  died,  but  the  banking 
business  he  established  is  continued  by  his  sons,  Adrian 
Iselin,  Jr.,  and  Columbus  O.  Iselin,  together  with  two 
younger  partners.  The  family  settled  early  in  New  Rochelle, 
and  has  largely  contributed  to  the  welfare  of  that  charming 
suburb.  The  robust  health  for  which  the  Iselin  family  is 
noted  is  due  to  pedestrian  exercise  and  to  their  aversion 
to  topcoats. 

Charles  Stewart  Smith,  born  in  Exeter,  New  Hamp- 
shire, March  2,  1832,  became  here  a  successful  dry-goods 
merchant,  first  as  partner  of  S.  B.  Chittenden  &  Co.,  and 
later  as  manager  of  A.  &  A.  Lawrence  &  Co.,  43  Broadway, 
who  were  succeeded  by  Smith,  Hogg  &  Gardner.  He  retired 
in  1887.  Mr.  Smith  was  President  of  the  New  York  Cham- 
ber of  Commerce  seven  years,  and  one  of  the  most  popular 
officers  the  association  ever  had.  He  was  prominent  as 
director  in  financial  institutions, — such  as  the  United  States 
Trust  Co.,  the  Fifth  Avenue,  and  Merchant's  Banks,  and 
as  member  of  the  Rapid  Transit  Commission.  He  procured 
for  the  city  the  equestrian  statue  of  General  Sherman,  by 
St.  Gaudens,  which  adorns  the  entrance  to  Central  Park  at 


338  PROGRESS  OF   THE   EMPIRE   STATE 

Fifty-ninth  Street.  He  was  a  regent  of  The  New  York  Uni- 
versity, of  Barnard  College,  and  a  liberal  contributor  to  the 
Metropolitan  Museum  of  Art.  He  died  on  November  30, 
1909.  His  widow,  Anna  Walton  Brown,  and  his  son,  Howard 
Caswell  Smith,  survive  him.  His  country  house  was  in 
Stamford;  his  city  home  25  West  Forty-Seventh  Street. 
Besides  a  large  fortune,  he  left  one  of  the  best  private 
galleries  in  the  city. 

Large  importers, like  Benkard&  Hutton,and  afewdomes- 
tic  commission  houses,  formerly  sold  the  balance  of  their  stock 
at  the  end  of  every  season  at  public  auction.  Some  sales  lasted 
several  days  and  longer;  some  realized  as  much  as  a  million. 
The  largest  auctioneers  were  Chesterman  &  Hoguet,  13 
William  Street.  Chesterman's  family  came  from  Sheffield. 
He  was  a  good  judge  of  brandy,  and  died  rich.  William  H. 
Hoguet  was  a  French-Irish  gentleman  from  Dublin,  who 
had  been  in  the  fur  trade.  Mr.  Hoguet  became  associated 
with  the  Wilmerdings;  when  he  left  them,  he  was  elected 
President  of  the  Emigrant  Industrial  Savings  Bank,  re- 
maining in  that  office  to  the  time  of  his  death.  This  bank 
became  under  his  management  more  prosperous  than  ever. 

Christian  William  Wilmerding,  ancestor  of  the  auction- 
eers, came  from  Brunswick  in  1783,  and  first  went  into  the 
glass  business.  He  was  much  devoted  to  the  German 
Society  which  assists  German  immigrants,  became  presi- 
dent in  1 8 16,  and  was  reelected  for  three  consecutive  years. 
His  sons,  William  R.  and  Henry  A.  Wilmerding,  were  dis- 
tinguished by  the  skill  with  which  they  managed  the  auction 
business.  Lucius  K.,  a  grandson,  still  continues  it,  but  the 
business  diminished. 

John  Haggerty  was  another  old-time  auctioneer.  The 
firm  first  was  Haggerty  &  Austin,  169  Pearl  Street.  When 
General  Spicer,  who  had  been  Haggerty's  salesman,  failed 
in   1862,  a  sensational   newspaper  reported  the  failure   of 


■^/t^  < 


HENRY  WILLIAM  EATON 

Insurance  manager;  horn  in  London,  England;  educated  in 
private  schools.  Entered  service  of  Liverpool  and  London  and 
Globe  Insurance  Co.  in  1866,  representing  it  at  Bristol,  1876- 
1878;  came  to  New  York  City  in  1878  as  assistant  manager  of 
New  York  branch;  made  resident  manager,  1887;  associate 
member  of  Institute  of  Actuaries  of  England;  president  National 
Board  of  Fire  Underwriters  of  United  States,  1897-1898.  Author 
Fifty  Years  of  Work  in  the  United  States  of  America  (history 
of  Liverpool  and  London  and  Globe  Fire  Insurance  Co.  in  the 
United  States);  also  many  papers  on  fire  insurance  topics. 


I  HE  COMMERCIAL  PROGRESS  OF  GOTHAM        339 

I  [aggerty.  Haggerty  sued  for  libel,  obtained  a  verdict,  and 
in  revenge  the  paper  called  him  "O'Haggerty,  the  Irish 
vender,"  which  added  to  his  popularity  without  injury 
to  his  credit.  Auctioneers  could  do  no  business  without 
influence  sufficient  to  obtain  a  license  and  money  enough  to 
give  bonds.  They  also  required  means  to  discount  sales. 
Consignors  expected  advances  almost  as  soon  as  the  auc- 
tioneer agreed  to  a  sale.  The  terms  of  the  sale  were  six 
to  eight  months  notes.  Credits  were  given  with  more 
liberality  than  they  now  are. 

Even  the  Collector  of  Customs  had  official  authority  to 
accept  notes  instead  of  cash  from  honorable  merchants  for 
import  duties.  In  those  days  impecunious  creditors  could 
be  deprived  of  their  liberty  when  they  did  not  satisfy  a  judg- 
ment. But  the  reputable  were  permitted  to  attend  to  the 
daily  routine  of  their  business,  within  certain  streets,  on 
condition  that  they  reported  in  the  evening  at  the  door  of 
the  Debtor's  Jail.  To  distinguish  these  merchants  from 
others  who  were  free  from  debt  and  could  go  where  they 
pleased,  delinquents  were  "on  the  limits."  Auctioneers 
were  expected  to  discount  sales  at  7  per  cent,  per  annum 
within  ten  days.  They  consigned  the  notes  to  Orlando  M. 
Bogart,  the  broker,  at  39  Wall  Street.  He  could  not  always 
sell  at  the  legal  rate,  which  was  then  seven;  some  went 
at  eight  or  nine  per  cent.,  others  did  not  sell  at  all.  The 
auctioneers  generally  lost  part  of  their  commission  by 
interest. 

Other  dry-goods  auctioneers  were,  Van  Wyck,  Kobbe 
&  Townsend,  and  Rudderow,  Jones  &  Co.,  who  sold  woolens. 
After  a  successful  day's  sale,  consignors  and  buyers  were 
invited  to  dine  at  Delmonico's  in  South  William  Street, 
where  they  remained  drinking  champagne  and  discussing 
dry-goods  to  the  small  hours  in  the  morning.  The  auction- 
eers of  merchandise  other  than  dry  goods  were: 


340  PROGRESS  OF  THE   EMPIRE   STATE 


Marble  and  mahogany,  Pells  &  Co., 

Fruit,  Minturn  &  Partridge, 

Tea,  and  other 

groceries,  L.  M.  Hoffman  &  Co., 


Neighbors 
of  each 
other  on 
Hanover 
Square. 


Sugar  and  molasses,        Greenough,  Burdett 

&Co.,  109  Wall  Street, 

Admiralty  Sales,  Simeon  Draper,    54  William  Street. 

Draper  was  a  jolly  good  fellow,  who  sold  the  prizes  we 
captured  from  the  Confederates  in  the  Brooklyn  Navy 
Yard;  later  he  was  appointed  Collector  of  the  Port. 

Of  immigrants  who  came  in  the  early  part  of  the  nine- 
teenth century,  the  sturdy  North  Germans,  from  Mecklen- 
burg, became  our  best  citizens.  Their  language,  an  idiom 
Fritz  Reuter  has  perpetuated  by  his  Olle  CameUen, 
readily  assimilated  American  English.  These  boys 
hardly  realized  that  any  difference  existed  between  their 
mother  tongue  and  our  own.  They  adapted  themselves 
to  many  other  American  ways.  A  great  many  became 
grocers;  of  some  5000  who  followed  this  vocation  in 
Manhattan  in  1852-3,  more  than  half  were  Bismarck's 
countrymen.  Beginning  as  clerks  sleeping  under  the 
counter,  they  devoted  themselves  assiduously  to  the  details 
of  the  business,  so  that  many  were  soon  able  to  establish 
themselves  on  their  own  account.  Their  advantage  over 
American  grocers — like  Acker  &  Merrall  on  Chambers 
Street,  Abram  Binninger  &  Co.,  26  Liberty  Street,  William 
S.  Corwin,  639  Broadway,  John  Duncan,  407  Broadway, 
and  the  "  Albros"  on  the  Bowery — consisted  of  the  privilege 
of  selling  liquor  at  retail,  free  of  license,  an  advantage 
disdained  by  Americans,  who  catered  more  to  the  family 
trade.  But  our  ladies  could  not  always  find  it  convenient 
to  go  to  them  and  left  their  daily  orders  at  the  neighboring 
corner  grocery.     They  were  careful  not  to  approach  the 


HIE  COMMERCIAL  PROGRESS  OF  GOTHAM        341 

partition  which  divided  the  store  from  the  rear  bar,  so  as 
to  escape  odors  of  rum  and  tobacco  which  emanated  thence. 
In  former  years  the  writer  had  business  relations  with  some 
of  these  grocers,  and  he  remembers  an  occasion  when  he 
was  obliged  personally  to  present  a  draft.  Following  the 
established  custom,  he  first  invited  the  drawee  to  a  social 
drink.  While  he  was  absorbed  in  a  mint  julep,  the  pro- 
prietor slipped  out  of  the  side  door,  leaving  the  bartender 
to  explain  his  unceremonious  disappearance.  On  a  sub- 
sequent occasion  we  were  careful  to  explain  the  object  of 
our  visit  before  the  drinks  were  mixed. 

The  consumption  of  groceries  is  now  infinitely  larger, 
yet  the  number  of  that  class  of  stores  has  diminished. 
Some  of  the  business  is  absorbed  by  department  stores,  or 
by  the  better  class  of  grocers.  Innumerable  "delicatessen" 
dealers  have  attracted  some  trade,  but  the  odors  of  Lim- 
burger  cheese  and  Mainzer  sauerkraut  which  greet  us 
when  we  enter  are  repulsive  to  delicate  noses. 

New  York  has  always  been  the  chief  American  market 
for  sugar.  A  great  part  of  the  eighty  pounds  per  capita  of 
the  population  which  we  use  passes  through  the  hands  of 
our  merchants.  One  of  the  largest  importers  was  Moses 
Taylor  who  began  his  mercantile  career  in  Howland's 
office;  with  Marshall  O.  Roberts  he  assisted  Cyrus  W. 
Field  in  laying  the  first  Atlantic  cable,  and  became  President 
of  the  City  Bank.  The  house  of  Goodhue  &  Co.  was 
established  in  the  first  decade  of  the  nineteenth  century  by 
Jonathan  Goodhue  from  Salem,  at  64  South  Street,  together 
with  Pelatiah  Perit.  The  firm  of  Howland  &  Aspinwall 
was  established  by  C.  G.  &  S.  Howland.  When  William 
H.  Aspinwall  entered  the  house,  it  took  an  interest  in  the 
Panama  Railroad  and  the  Pacific  Mail  Steamship  Co. 
The  city  of  Aspinwall  was  named  by  them.  Fish  & 
Grinnell  were  the  predecessors  of  Grinnell,  Minturn  &  Co. 


342  PROGRESS  OF  THE   EMPIRE   STATE 

Moses  H.  Grinnell  became  Collector  of  the  Port.  Alexander 
Maitland,  a  kinsman  of  Robert  Lenox,  who  founded  the 
Presbyterian  Hospital  and  the  Lenox  Library,  Zerega  &  Co., 
and  Munoz  &  Esperiella  were  sugar  importers. 

L.  E.  Amsinck,  Charles  Li'iling  and  other  German  bank- 
ers were  sugar  importers. 

To  secure  consignments,  almost  all  of  them  made  ad- 
vances to  planters  before  their  crops  were  gathered.  When 
they  were  small  and  when  sugar  was  dearer  in  Habana 
than  it  was  in  New  York  many  planters  sold  it  there. 
They  did  not  forget  that  they  had  sold  it  already,  but 
simply  let  New  Yorkers  wait,  trusting  to  be  able  at  some 
future  harvest  time  to  redeem  their  pledges.  A  large  pro- 
portion of  sugar  is  consumed  in  the  natural  state.  Of 
refiners  R.  L.  &  A.  Stuart  have  long  been  the  most  im- 
portant. They  came  from  Scotland,  and  built  the  sugar 
house  which  covered  the  block  between  Chambers  and 
Reade  on  Greenwich  Street.  They  made  excellent  candy. 
Whoever  had  business  with  the  firm  was  presented  with  a 
stick  of  it  by  Mrs.  Stuart  herself.  She  lived,  when  she 
retired,  in  a  corner  house  on  upper  Fifth  Avenue,  and  left 
an  endowment  to  Princeton  University.  A  majority  of  our 
refiners  hailed  from  Northern  Germany;  they  had  already 
learned  how  to  boil  sugar  in  Hamburg  or  England  before 
coming.  The  Havemeyers  came  from  Biickeburg  in  1799, 
and  began  business  under  the  firm  name  of  Fred  &  Wm. 
Havemeyer,  at  66  Vandam  Street.  Henry  O.  Havemeyer 
created  the  Sugar  Trust;  his  father  was  thrice  Mayor. 
Some  people  found  him  arrogant,  but  he  delivered  our  city 
from  the  disgraceful  bondage  of  William  M.  Tweed. 

Here  are  the  names  of  other  German-American  sugar 
refiners:  Peter  &  William  Moller,  Mathiesen  &  Wiechers, 
De  Castro  &  Donner,  Henry  Kattenhorn,  Claus  Doscher, 
Henry    OfFermann,    Carsten    Sierk,    and    Dick    &    Meyer. 


Mil    COMMERCIAL  PROGRESS  OF  GOTHAM        343 

Cord  Meyer  created  Elmhurst  and  Forest  Hill,  charming 
Long  Island  suburbs.  Henry  T.  Ockershausen  was  a  noted 
fireman.  All  of  them  made  money.  Sugar  merchants 
were  not  alone  in  a  liberal  treatment  of  desirable  corre- 
spondents. When  Soulouque,  the  Emperor  of  Hayti,  found 
himself  financially  embarrassed,  he  called  on  Rolker  & 
Mollman,  his  agents  at  96  Pearl  Street.  They  responded 
by  a  large  shipment  of  Mexican  dollars,  which  was  recipro- 
cated on  the  part  of  the  Emperor  by  continuous  con- 
signments of  10  per  cent,  of  the  crops  of  the  coffee 
and  cocoa  paid  by  his  colored  subjects  in  lieu  of  taxes. 
Rdlker's  firm  made  handsome  commissions,  but  they 
had  to  mend  the  Emperor's  uniform  free  of  charge  when 
it  needed  repairs. 

The  wholesale  grocery  business  was  formerly  in  the  hands 
of  a  few  large  houses,  one  being  Sturges,  Bennett  &  Co.,  123 
Front  Street.  Jonathan  Sturges  had  first  been  associated 
with  Reed  under  the  firm  name  of  Reed  &  Sturges.  Sturges 
was  director  in  several  railroads  and  banks.  He  became 
one  of  the  founders  of  the  Union  League  Club,  on  Union 
Square  North,  and  took  a  deep  interest  in  the  promotion 
of  American  art.  After  the  dissolution  of  Sturges,  Bennett 
&  Co.,  Benjamin  G.  Arnold,  our  best  known  coffee  dealer, 
became  his  son's  partner,  under  the  firm  name  of  Arnold, 
Sturges  &  Co.  He  was  daring  enough  to  engineer  with 
Bowie  Dash,  in  1875,  the  purchase  of  several  hundred 
thousand  bags  of  Java  coffee,  intending  to  corner  the  market. 
Being  the  only  holder,  he  did  command  as  much  as  20  cents 
per  pound  for  lots  which  were  urgently  needed.  It  looked 
as  if  the  speculators  would  make  money,  until,  in  1877,  a 
competitor  had  the  audacity  to  order  10,000  bags  by  steamer 
from  London.  Coffee  declined  faster  than  it  had  risen. 
The  experiment  is  being  repeated  by  the  Brazilian  Govern- 
ment, under  the  able  management  of  Mr.  Hermann  Sielken, 


344  PROGRESS  OF  THE   EMPIRE   STATE 

on  a  larger  scale;  whether  it  will  be  more  successful  remains 
to  be  seen. 

Another  grocery  firm  in  Front  Street  was  E.  D.  Morgan 
&  Co.  Mr.  Morgan  was  U.  S.  Senator.  When  our  civil  war 
began,  he  was  Governor  of  the  State;  after  the  first  battle 
of  Bull  Run,  he  sent  25,000  New  York  soldiers  to  the  front. 
He  lived  at  35  Lafayette  Place.  John  T.  Terry,  his  genial 
surviving  partner,  enjoys  life  at  ninety.  Thurber's  firm 
was  the  first  one  to  launch  a  large  grocery  business  on  the 
West  Side.  It  originated  in  the  friendly  relations  between 
John  F.  Pupke,  a  successful  retail  grocer  on  Greenwich, 
corner  Rector  Street,  and  H.  K.  Thurber,  which  led  to  a 
copartnership.  Pupke  withdrew  when  he  found  the  busi- 
ness too  risky,  and  F.  B.  Thurber,  H.  K.'s  brother,  joined. 
The  firm  changed  to  Thurber,  Whyland  &  Co.,  then  to  the 
"American  Grocery  Co.,"  and  finally  it  failed.  Mr.  Thur- 
ber borrowed  $50,000  to  establish  the  American  Opera 
Company.  In  1885  Theodore  Thomas  was  director;  the 
first  performance  took  place  at  the  Academy  of  Music  in 
Fourteenth  Street,  in  January,  1886.  It  was  a  great  artis- 
tic success,  but  a  miserable  financial  failure.  The  company 
was  finally  wrecked  in  Buffalo  on  the  way  home  from  the 
Pacific  Coast.  Mr.  Thurber's  ambitious  wife  gave  musical 
soirees  to  distinguished  strangers,  under  the  direction  of 
a  maitre  de  plaisir,  until  an  Italian  nobleman  discovered 
in  the  maestro  a  waiter  who  had  served  him  in  Milan. 
F.  B.  Thurber  studied  law  in  Columbia  College  and  was 
admitted  to  the  bar  at  the  age  of  sixty. 

The  firms  on  lower  Hudson  Street  who  do  business  where 
Thurber  began,  sell  more  on  closer  margins  than  their 
distinguished  predecessors  on  Front  Street.  They  buy  for 
cash  from  New  York  resident  agents  of  producers  of  the 
goods.  These  agents,  who  receive  daily  cable  offers  from 
every  port  of  the  globe,  canvass  the  whole  trade.     Their 


JOHN  J.  GUILE 

Insurance  manager;  was  born  in  Liverpool,  England,  May  5, 
1854.  In  1872,  began  insurance  business  with  the  Royal  Insur- 
ance Co.  of  Liverpool,  leaving  there  after  ten  years  to  become 
associated  with  the  .Sun  Insurance  Office  of  London.     In  May, 

1885,  he  was  appointed  secretary  of  the  United  States  branch  of 
the  Sun  Insurance  Office;   became  assistant-manager  in  May, 

1 886,  and  manager  in  December,  1886,  a  position  which  he  has 
since  held,  with  offices  in  New  York. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM       345 

commission  is  smaller — in  many  cases  one  per  cent. — 
than  the  speculative  profits  which  merchants  formerly  made. 
Corners  have  become  difficult  by  this  change. 

Richard  Alsop  from  Long  Island  founded  the  firms  of 
Alsop  &  Company,  Alsop  &  Chauncey,  and  Alsop,  Wetmore 
&  Cryder  of  Valparaiso.  A  large  part  of  the  business  with 
Chile  and  Peru  later  fell  into  the  hands  of  W.  R.  Grace, 
the  genial  Irishman  who  was  twice  Mayor  of  the  city.  Na- 
thaniel L.  &  George  Griswold,  72  South  Street,  lived  in 
Newport,  and  did  business  with  the  West  Indies. 

When  Royal  Phelps,  of  47  Exchange  Place,  another  old- 
time  merchant,  left  his  young  Creole  wife  for  the  first  time 
on  a  trip  to  Paris,  she  sent  him,  through  George  Stoker, 
before  the  cable  was  in  working  order,  via  Cape  Race,  a 
message:  "Remember  you  are  married."  He  promptly 
answered:  "Too  late";  but  to  atone  he  brought  her  a  fine 
India  shawl  when  he  returned.  Mrs.  Phelps  was  pleased; 
she  ceased  to  torment  him  with  reminders,  but  expected  a 
finer  present  on  his  return  after  every  subsequent  absence. 

The  firm  of  C.  G.  Gunther  &  Sons  was  established  by 
Charles  Godfrey  Gunther  in  conjunction  with  his  father, 
a  native  of  Germany,  and  several  brothers,  at  46  Maiden 
Lane,  near  William  Street.  A  picture  of  their  store  was 
published  in  Valentines  Manual  for  1865.  They  be- 
came the  largest  retail  furriers  and  acquired  the  reputa- 
tion of  being  the  most  reliable,  which  they  have  maintained 
for  a  century.  Gunther  took  an  active  part  in  politics;  he 
was  President  of  the  Almshouse,  a  sachem  of  Tammany 
Hall,  and  became  Mayor  in  1864.  His  administration  was 
distinguished  by  rigid  economy. 

Diagonally  opposite  Gunthers'  on  Maiden  Lane,  the 
firm  of  Strassburger  &  Pfeiffer  imported  toys  and  china. 
George  Borgfeldt,  their  chief  clerk,who  came  from  Schleswig- 
Holstein,  found  it  difficult  to  provide,  for  Christmas,  the 


346  PROGRESS  OF  THE   EMPIRE   STATE 

Carnival,  and  other  holidays,  the  variety  of  goods  which  his 
customers  wanted.  When  Pfeiffer  went  to  live  in  Paris, 
Borgfeldt  became  manager,  and  he  persuaded  the  customers 
to  assume  the  risk  of  ordering  the  goods  they  would  prob- 
ably want  for  their  own  account.  Instead  of  the  large 
profits  they  had  to  pay  to  his  predecessors,  Borgfeldt 
charged  a  moderate  import  commission.  His  firm  was  no 
longer  obliged  to  keep  a  stock  of  capricious  merchandise, 
and  his  customers  bought  and  sold  at  lower  prices.  By  the 
adoption  of  this  policy,  the  business  assumed  large  dimen- 
sions. Borgfeldt  was  a  jolly  good  fellow,  who  could  swear 
like  a  trooper  and  drink  like  a  fish — as  well  as  Thomas 
Garner,  the  cheery  Englishman  who  was  as  successful  in 
cotton  prints  as  Borgfeldt  was  in  toys,  neither  being  able 
to  attend  to  business  until  they  had  taken,  at  Clark  & 
Brown's,  their  daily  "eye  opener."  Borgfeldt's  young 
widow,  Alice  Lahey,  married  an  Austrian  nobleman  in 
Vienna.     The  firm  continues  to  exist. 

Cooper  &  Hewitt,  17  Burling  Slip,  were  not  only  large 
manufacturers  of  iron,  but  public  spirited  citizens  as  well. 
Peter  Cooper  founded  in  1857  the  "Cooper  Union  for  the 
Advancement  of  Science  and  Art."  He  was  assisted  by 
Edward  Cooper,  his  son;  Abram  S.  Hewitt,  his  son-in-law; 
Wilson  G.  Hunt,  Daniel  F.  Tieman,  the  ex-Mayor,  and 
John  E.  Parsons,  the  lawyer.  In  addition  to  free  schools 
of  science  and  art,  it  bestows  prizes  for  useful  inventions, 
contains  a  library,  and  has  been  of  great  benefit  for  the 
education  of  the  children  of  the  poor  and  middle  classes. 
Mr.  Hewitt  was  a  man  of  remarkable  ability  who  took  a 
quick  advantage  of  every  opportunity.  When  the  Steel 
Trust  was  founded,  he  was  elected  honorary  director. 

The  American  Institute,  organized  in  Tammany  Hall, 
on  Nassau,  corner  of  Spruce  Street,  in  1828,  has  greatly 
assisted  the  promotion  of  American  industry.     The  earliest 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        347 

exhibitions  were  held  in  Masonic  Hall,  on  Broadway  near 
Anthony  Street,  subsequently  in  Niblo's.  When  the  end  of 
the  World's  Fair  of  1853  left  the  Crystal  Palace  unoccupied, 
the  Institute  held  exhibitions  there  until  the  "glass  house," 
a  pride  of  the  city,  was  destroyed  by  fire  in  October,  1858. 
It  was  a  sad  blow,  not  alone  for  patrons  of  the  American 
Institute,  but  also  for  the  owners  of  objects  of  art  which 
had  remained  since  the  opening  of  the  World's  Fair  and  were 
destroyed.  It  always  has  been  a  practice  of  the  Institute 
to  reward  deserving  inventors;  among  them  were:  Joseph 
Francis, — lifeboat,  1839  (gold  medal);  sewing  machines — 
of  Elias  Howe,  1846;  Wilson,  1850;  Singer,  1851  (gold 
medal);  Wheeler,  1853.  Richard  M.  Hoe  received  a  medal 
for  his  printing  press  in  1848.  Models  of  vessels  exhibited 
by  Cornelius  Vanderbilt  and  C.  R.  Poillon  received  prizes; 
the  yacht  America,  was  distinguished  by  a  gold  medal. 
Other  useful  inventions,  shown  first  by  the  American  Insti- 
tute, were:  Dr.  Nott's  anthracite  coal-burning-stove,  Morse's 
telegraph,  McCormick's  famous  reaper,  which  received  a 
gold  medal  in  Castle  Garden,  in  1849.  Bell's  telephone, 
which  annihilated  distances  and  rendered  human  locomo- 
tion an  unnecessary  luxury,  was  exhibited  here  in  1877  first. 
In  i860  Philip  Reis  had  invented  a  telephone  which  he 
used  as  a  toy  for  singing  favorite  melodies  to  distant 
friends.  His  efforts  to  introduce  it  failed.  It  was  not 
until  Alexander  Graham  Bell  perfected  the  instrument  and 
brought  it  to  the  attention  of  Heinrich  Stephan,  the 
intelligent  Postmaster-General  of  Germany,  that  it  was 
practically  employed  to  converse  at  distances  over  electric 
wires  with  ease.  Here  the  first  company  was  organized 
August  31,  1877,  under  the  name  of  "The  Telephone  Co.  of 
New  York."  This  association  published  its  first  annual 
report  October  23,  1878,  when  its  directory  contained  the 
names  of  442  paying  subscribers.     On  October  1,  191 1,  the 


348  PROGRESS  OF   THE    EMPIRE   STATE 

successor  of  that  same  company  published  in  its  monthly 
New  York  directory  the  names  of  186,000  subscribers;  they 
used  428,000  instruments,  330,000  of  which  were  in 
Manhattan  alone.  By  facilitating  conversational  inter- 
course, the  telephone  has  largely  contributed  to  our  growth. 
Formerly  we  were  identified  with  our  habitation;  now  we 
are  known  by  the  number  of  our  telephone. 

We  need  knock  no  longer  at  distant  doors,  but  call 
simply  over  the  electric  wire  until  our  familiar  voice  is 
recognized.  A  frequent  use  of  the  Bell  instrument  im- 
proves the  enunciation  of  words. 

The  Steinways  came  from  Brunswick  in  1849,  after  the 
German  "Zollverein"  excluded  pianos,  which  Henry  Engel- 
hardt  Steinweg,  the  father,  had  been  making  in  Seesen. 
They  began  here  as  journeymen,  and  made  their  first 
American  instruments  in  a  rear  tenement  on  Varick 
Street.  But  they  were  not  actually  established  until  they 
rented  a  three-story  brick  dwelling,  88  Walker  Street,  in 
1853.  Here  they  made  a  world-wide  reputation  by  the 
excellent  quality  and  sweet  tones  of  their  instruments. 
Their  financial  success  was  due  to  the  energy  of  William 
Steinway.  His  tact  and  public  spirit  elevated  their  reputa- 
tion; In  1890  he  became  Rapid  Transit  Commissioner  and 
built  many  houses  for  the  use  of  his  workmen  on  Long 
Island,  in  a  village  which  still  bears  his  name.  Robert  G. 
Ingersoll  kept  a  supply  of  greenbacks  in  a  drawer,  to  which 
every  member  of  his  family  had  free  access;  they  were 
welcome  to  take  what  they  needed.  Steinway  may  have 
been  less  generous  to  his  family,  but  he  was  more  liberal  to 
suffering  strangers.  The  writer  never  called  on  him  for 
assistance  to  a  worthy  charity  when  he  did  not  respond. 

Roosevelt  &  Sons  were  hardware  dealers.  They  added 
looking-glasses  to  their  business  when  they  moved  into  the 
new  iron  warehouse  at  94  Maiden  Lane.     Theodore,  one  of 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        349 

the  sons,  lived  on  Broadway, and  became  father  of  "Teddy," 
since  Lincoln's  time  the  most  popular  President  of  the 
United  States.  The  father  found  it  more  difficult  to  satisfy 
the  capricious  demand  for  different  sizes  of  glass  than  the 
son  to  please  political  opponents.  Benjamin  W.  Merriam,  of 
130  Chatham  Street,  the  largest  retailer,  walked  into 
Roosevelt's  one  day,  and  asked  for  a  size  of  glass  they  were 
out  of.  So  Merriam  was  compelled  reluctantly  to  call  on 
Bendit,  who  kept  his  store  in  Gold  Street  at  the  opposite 
corner  of  Maiden  Lane.  Bendit  had  watched  him  cross 
and  declined  to  sell  because  Merriam  had  not  come  to  him 
in  the  first  place.  When  neither  begging  nor  the  offer  of 
a  premium  had  effect,  and  when  Merriam  was  ready  to 
cry,  Bendit  relented  and  offered  the  goods  at  the  regular 
price  if  Merriam  would  dance  an  Irish  jig.  The  venerable 
gentleman  took  off  his  coat,  and  danced  to  the  tune  of 
Bendit's  whistle.  One  member  of  Roosevelt's  family  was 
an  alderman  and  another  endowed  the  hospital  which  bears 
his  name. 

There  were  many  important  metal  houses  in  the  vicinity 
of  Maiden  Lane.  Marshal  Lefferts  dealt  in  iron  at  90 
Beekman  Street.  He  constructed  telegraph  lines  between 
New  York  and  Boston,  and  New  York  and  Buffalo,  in  1849. 
His  lines  were  consolidated  with  the  Morse  lines  and  finally 
in  1866  with  the  Western  Union  Telegraph  Company.  He 
was  connected  with  the  Seventh  Regiment,  the  first  to 
leave  in  1861  for  the  seat  of  war,  and  has  been  its  colonel 
with  the  title  of  General. 

The  Astor  dynasty  was  founded  in  1784,  when  John 
Jacob  Astor  came  from  a  suburb  of  Heidelberg  and  secured 
a  position  as  clerk,  at  a  weekly  salary  of  two  dollars,  with 
Robert  Bowne,  a  skin  dealer  in  Gold  Street.  When  Bowne 
died,  Astor  succeeded  to  his  business  some  two  years  later 
and  became  a  successful  merchant.     He  was  able  in  1787 


350  PROGRESS  OF  THE   EMPIRE   STATE 

to  join  the  German  Society,  which  assisted  then,  as  it  does 
now,  impecunious  German  immigrants.  Foresight  in  the 
selection  of  real  estate  which  Mr.  Astor  purchased  made 
him  and  his  children  wealthy.  His  friend,  Washington 
Irving,  inspired  him  to  found  the  Astor  Library  on  Lafayette 
Street  opposite  his  home.  None  of  our  rich  men  have  done 
more  for  us. 

The  firm  of  Phelps,  Dodge  &  Co.,  dealers  in  metals,  was 
established  when  Anson  G.  Phelps,  a  full-fledged  tinker, 
came  from  Connecticut  in  1818,  and  became  a  partner  of 
Elisha  Peck;  the  firm  of  Phelps  &  Peck  was  soon  dissolved 
and  Thomas  Stokes,  a  tailor  from  William  Street,  entered 
the  firm.  He  was  the  father  of  Anson  Phelps  Stokes. 
When  William  E.  Dodge  married  Melissa,  a  daughter  of  Mr. 
Phelps,  he  became  a  partner,  and  the  firm  became  Phelps, 
Dodge  &  Co.  in  1833.  Mr.  Dodge  was  one  of  the  first 
directors  of  the  Mutual  Life  Insurance  Company,  and  of  the 
Central  Railroad  of  New  Jersey.  He  and  his  children  have 
given  large  sums  of  money  to  charity. 

The  firm  of  Boorman,  Johnston  &  Company,  119  Green- 
wich Street,  who  were  closely  allied  with  the  Central 
Railroad  of  New  Jersey,  became  embarrassed  by  the  failure 
of  that  road,  and  by  the  decline  of  iron  in  1876.  John 
Taylor  Johnston  had  one  of  the  finest  collections  of  oil  paint- 
ings in  the  country,  including  some  Turners  and  several 
Meissoniers,  which  he  was  compelled  to  sacrifice  at  auction. 
This  was  the  first  important  art  sale  ever  held  here.  A 
daughter  of  Mr.  Johnston  married  Pierre  Mali,  the  Bel- 
gian Consul.  The  senior  partner  of  Mali's  house  has 
been  Consul  for  Belgium  ever  since  in  1830  the  country 
became  independent;  the  firm  has  been  agent  for  the  same 
Belgian  cloth  manufacturer  since  1825. 

When  the  process  of  making  Bessemer  steel  required  it, 
Naylor  &  Co.,  corner  Cliff  and  John  Streets,  were  the  first 


/r<Jz&r 


WILLIAM  ASTOR 

Capitalist;  born  in  New  York  City,  June  12,  1829,  in  the  old 
Astor  Mansion  on  Lafayette  Place,  adjoining  the  Astor  Library; 
son  of  William  B.  and  Margaret  Rebecca  (Armstrong)  Astor,  and 
grandson  of  John  Jacob  Astor;  graduated  from  Columbia  College, 
1849  After  graduation,  went  on  a  long  tour  in  Europe,  Egypt, 
and  the  Orient.  As  a  result  of  this  visit,  he  retained,  throughout 
his  life,  an  active  interest  in  Oriental  art  and  literature.  He 
entered  his  father's  office  as  assistant  manager  of  the  family's 
estate  and  after  the  death  of  his  father,  in  1875,  when  hah  of  the 
estate  became  his  own  by  inheritance,  greatly  added  to  his  hold- 
ings Mr.  Astor  was  fond  of  country  life,  and  created  an  extensive 
and  beautiful  estate  at  Ferncliff.  He  built  a  railroad  from  St. 
Augustine  to  Palatka,  in  Florida,  in  1875,  and  constructed  sev- 
eral blocks  in  Jacksonville.  He  was  a  yachtsman  of  distinction, 
his  first  yacht,  the  Ambassadress,  being  probably  the  largest  and 
finest  sailing  yacht  ever  launched.  In  1 884,  he  had  built  for  him 
the  steam  yacht  Nourmahal,  which  was  one  of  the  finest  of  its 
day.     Died  in  Paris,  April  25,  1892. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        351 

to  import  "Spiegel  Eisen."  Theodore  Dreier  from  Brook- 
lyn was  the  active  partner.  His  charming  daughters  have 
earned  by  their  public  spirit  a  national  reputation.  Hen- 
dricks &  Bro.,  77  Broad  Street,  called  the  "copper  kings/' 
dealt  in  the  pig  metal  when  it  came  chiefly  from  the  Calumet 
&  Hecla  and  other  Minnesota  mines.  When  duties  on 
metals  became  desirable  for  protection  of  mine  owners  and 
necessary  for  revenue,  several  houses  began  to  have  their 
lead  and  smelter  cast  abroad  into  figures  of  Greek  gods 
and  Christian  Madonnas,  which  under  the  designation  of 
fine  arts  were  admitted  free  of  duty.  An  astute  predeces- 
sor of  Collector  Loeb  became  suspicious  when  he  found  no 
increase  in  the  stock  here  of  plastic  art,  but  learned  that  pig 
lead  was  sold  below  cost,  when  to  Spanish  quotations  the 
legitimate  duty  was  added.  He  did  not  hesitate  to  seize 
all  the  "gods,"  and  "goddesses,"  including  the  immaculate 
virgins,  he  could  find. 

Amongst  cotton  exporters,  the  firm  of  Faber  &  Bierwirth, 
34  New  Street,  succeeded  by  Bierwirth  &  Rocholl,  had  an 
excellent  reputation.  While  Bierwirth,  according  to  his 
custom,  was  playing  whist  on  a  Sunday  evening  in  1857 
with  some  friends  at  his  Brooklyn  residence,  he  was  called 
out  by  a  clerk,  who  had  come  to  bring  the  startling  news 
that  Stolterfoht,  Bierwirth's  Liverpool  agent,  had  failed. 
Bierwirth  returned  to  his  cards,  finished  the  game,  and 
parted  with  his  companions  as  if  nothing  had  happened. 
When  he  came  to  his  office  on  the  following  day  he  made 
an  assignment,  but  he  paid  every  dollar  he  owed.  Rocholl 
became  President  of  the  German-American  Bank. 

Charles  C.  Taber  had  his  office  at  76  Wall  Street,  while 
he  packed  cotton  in  his  warehouse  on  New  Street.  He 
lived  on  the  Bloomingdale  Road,  and  drove  with  a  span  of 
horses  down  every  day  with  such  regularity  that  neighbors 
set  their  watches  by  the  time  of  his  arrival.     Inman,  Swan 


352  PROGRESS  OF  THE   EMPIRE  STATE 

&  Co.,  62  Wall  Street,  were  large  cotton  dealers.  The 
senior,  an  able  Southern  merchant,  was  President  of 
the  Richmond  Terminal  Co.  John  H.  Brower  &  Co.,  45 
South  Street,  owners  of  the  Texas  Line,  brought  cotton 
from  Galveston  here  in  their  own  ships.  One  of  them, 
the  Harvey  Birch,  was  the  first  ship  destroyed  by  the 
Confederates. 

While  the  smuggler's  ways  are  dark,  his  tricks  have 
incidentally  been  legitimate.  The  writer  learned  of  an 
instance  where  the  government  has  unwittingly  assisted 
smugglers  to  defraud  itself.  Through  the  ignorance  of  a 
Congressman,  the  value  of  Bremen  rix-thalers  was  in  a 
former  tariff  bill  erroneously  fixed  at  seventy,  instead  of 
eighty  cents.  This  was  not  discovered  until  the  bill  had 
been  engrossed,  and  signed  by  the  President.  It  was 
corrected  in  printed  copies,  but  was  law  nevertheless.  One 
shrewd  importer  who  discovered  the  error  had  his  invoices 
made  in  Bremen  rix-thaler  valuations  by  his  Bremen 
bankers,  and  paid  10  per  cent,  duty  less  than  his  neighbors, 
in  consequence.  The  mistake  could  not  be  legally  corrected 
before  the  next  session  of  Congress,  nor  until  after  these 
shrewd  importers  had  taken  great  advantage. 

The  increase  of  our  population,  crowded  into  nar- 
row streets,  compelled  the  poor  to  live  in  close  quarters; 
rich  families  alone  could  afford  the  luxury  of  living  in  a 
house  by  themselves.  Many  old  tenement  houses  were 
provided  neither  with  ventilation  nor  sanitary  appliances. 
Those  built  over  entire  lots,  without  airshafts  between  the 
front  and  rear  houses,  were  called  "double-deckers."  When 
the  Board  of  Health  protested,  better  buildings  were 
erected.  Those  which  are  furnished  with  modern  improve- 
ments and  elevators  are  styled  "apartment  houses"; 
a  number  of  the  best  of  recent  construction  are  fireproof. 
Here  is  a  list  of  our  fireproof  buildings: 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        353 


Stories  in  height 

Manhattan 

Bronx 
I84 

Brooklyn 

Queens 

Richmond 

Total 

i-5 

989 

487 

95 

48 

I803 

6-10 
n-iS 

16-20 

I203 
617 

65 

13 

91 

9 

5 

2 

I3H 

626 

65 

21-25 
Over  25 

24 

IO 

24 
IO 

Total 

2908 

197 

587 

100 

50 

3842 

We  have  more  than  any  other  city,  and  they  form, 
according  to  the  opinion  of  expert  underwriters,  an  effective 
barrier  against  the  spread  of  conflagrations. 

Few  people  realize  that  Holland  dwellings  with  gable 
roofs  still  exist,  and  that  some,  especially  on  the  borders  of 
(Greenwich  Village,  are  used  for  business.  Strong  enough  for 
the  purpose  intended,  they  required  support  when  they  were 
transformed  into  warehouses  for  heavy  packages  and  safes. 
Dutch  architecture  was  replaced  by  broader  and  higher 
structures;  the  beams  were  held  by  wooden  posts,  the  taller 
being  safeguarded  by  cast-iron  fronts.  When  the  value  of 
real  estate  in  the  financial  district  increased,  nine-story 
houses  with  iron  columns  with  foundations  of  cement  were 
constructed.  Granite  and  iron  began  to  be  used;  imported 
cement  strengthened  the  walls;  houses  grew  taller  when 
science  discovered  better  methods  for  their  safety. 

Thus  came  the  age  of  steel  construction,  which  replaced 
cast-iron  beam  holders.  By  saving  space  and  weight, 
money  was  saved,  but  the  disadvantage  of  not  being  fire- 
proof remained  an  obstacle.  To  remedy  this  fault,  the 
steel  was  protected  by  fireproof  material, — the  arches  by 
concave  blocks  of  burned  terra  cotta,  lessening  the  weight 
of  arched  ceilings  and  offering  greater  resistance  to  heat. 


23 


354  PROGRESS  OF   THE   EMPIRE   STATE 

Experience  has  taught  that  the  underside  of  beams,  stretched 
between  arches,  must  be  protected  against  fire.  When 
invention  could  go  no  further,  help  was  found  by  returning 
to  frame  walls,  fitted  with  arches.  As  buildings  grew  higher, 
a  change  was  made  by  adopting  closely  riveted  framework. 
Ever)'  part  could  be  protected  with  fireproof  material  and 
the  height  could  be  increased  to  forty  stories.  The  outer 
walls  of  each  story  rested  on  steel  beams,  of  even  strength 
in  the  upper  and  lower  stories.  If  necessary,  the  building 
could  be  erected  from  the  roof  down  instead  of  from  the 
bottom  up.  The  foundations  were  no  longer  built  of  massive 
walls,  but  with  steel  beams  placed  across.  Where  the  height 
of  the  building  permitted,  the  steel  foundation  was  bored 
ingeniously  through  solid  rock,  from  forty  to  one  hundred 
feet  below  the  street  level. 

The  progress  in  building  improved  the  elevator  system, 
not  to  mention  pipes  that  had  to  be  provided  to  hold  the 
machines  which  force  the  pressure  of  water  to  the  apex  of 
the  tall  buildings.  Even  the  timid,  who  feared  for  the 
safety  of  these  airy  structures,  had  to  acknowledge  the 
elasticity  with  which  they  withstood  the  shock  of  the  San 
Francisco  earthquake;  it  demonstrated  the  stability  of  the 
tallest. 

The  necessity  for  fireproof  safety,  which  should  combine 
light  weight  with  great  resisting  power,  caused  the  innova- 
tion of  a  mixture  of  sediment  with  ashes  of  sea  coal,  and, 
when  it  grew  cheaper,  with  Portland  cement.  This  material 
protected  not  alone  steel,  but  was  also  adapted  for  the 
restoration  of  floorwork  between  the  pillars;  it  was  finally 
discovered  to  be  useful  for  the  walls  without  and  the  steel 
beams  within.  The  great  Baltimore  fire  demonstrated 
that  the  quality  of  this  material  was  superior  to  "hollow 
terra  cotta."  It  proved  to  be  the  only  material  that 
withstood  the  glow  of  the  fiery  element  and  the  force  of 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        355 

water  power.  Likewise  it  was  found  that  the  concrete  and 
steel  harmonized,  not  alone  as  a  protection  against  fire, 
but  also  against  humidity;  we  came  thus  to  learn  the  latest 
and  best  method,  the  "reinforced  concrete  construction." 
It  follows  that  a  scientific  combination  of  steel  and  concrete, 
the  former  filling  demands  against  draughts,  the  latter 
against  the  pressure  of  weight,  led  to  the  most  economical, 
and  the  safest  construction. 

When  the  under  fibers  of  heated  rafters  were  torn,  while 
the  upper  were  bruised,  it  became  evident  that  construction 
of  concrete,  underlined  with  steel,  was  less  expensive  and 
most  practicable.  Used  for  factories  of  moderate  height, 
it  creates  a  most  economic  protection  against  fire,  while  it 
has  strength  to  resist  the  greatest  pressure  of  weight. 

The  possibilities  of  building  achievement  seem  to  have 
been  reached,  yet  the  future  may  bring  further  discoveries. 
Extreme  values  of  the  ground  in  our  financial  district  have 
induced  owners  to  seek  an  offset  in  extreme  height.  The 
space  on  which  No.  I  Wall  Street  was  erected,  and  where 
lawyer  Benjamin  D.  Silliman,  Yale's  benefactor,  once 
lived,  brought  recently  #600  a  square  foot. 

The  Woolworth  Building,  fronting  on  Broadway,  and 
extending  from  Barclay  Street  to  Park  Place,  is  the  greatest 
of  all  commercial  structures.  The  main  building  has  thirty 
stories  and  the  tower  twenty-five  additional,  and  is  750 
feet  above  the  street  level.  The  weight  of  150,000  tons, 
supported  by  sixty  columns,  pneumatically  constructed, 
rests  upon  solid  rock  one  hundred  and  fifteen  feet  below 
the  street.  Made  of  reinforced  concrete,  and  of  cylinder 
form,  it  is  a  marvel  of  modern  construction.  The  main 
building  is  provided  with  twenty-four  passenger  elevators, 
and  will  accommodate  25,000  busy  people  during  busy 
hours. 

When  we  look  from  John  Street  corner  of  Broadway  to 


356  PROGRESS  OF  THE    EMPIRE   STATE 

the  northwest,  we  see  in  a  glance  creditable  specimens  of 
the  architecture  of  three  centuries: 

i.  St.  Paul's  chapel  finished  in  1766.  The  old  church- 
yard fronting  Broadway,  covers  the  remains  of  General 
Montgomery  and  of  Thomas  Addis  Emmett. 

2.  The  Astor  Hotel  opened  in  1842:  the  front  portico 
which  lent  to  the  facade  its  greatest  charm  has  been  re- 
moved. State  dinners  now  held  at  the  "Waldorf"  were 
formerly  given  at  the  Astor. 

In  the  Rotunda  Aleck  Alick,  as  Stewart  was  called, 
took  with  his  cronies  luncheon  including  that  apple-pie 
which  became  famous. 

3.  The  Wool  worth,  the  finest  of  all  modern  structures 
on  Barclay  Street,  Broadway  and  Park  Place,  forms  the 
background. 

We  went  through  Barclay  Street  formerly  over  the 
Hoboken  ferry,  to  the  Elysian  Fields  and  encountered 
squaws  who  came  to  sell  moccasins  they  embroidered  in 
their  camp  on  Union  Hill. 

Robert  L.  Stevens  lived  in  35  Barclay  Street. 

Mr.  Woolvvorth  made  his  fortune  by  the  sale  of  popular 
articles  of  merchandise  at  five  and  ten  cents.  Beginning  in 
a  small  way  with  the  incoming  tide  of  our  prosperity  in  1879, 
he  now  employs  an  army  of  20,000  people  in  624  stores,  and 
continues  annually  to  sell  the  same  articles  to  the  value 
of  some  #50,000,000.  He  gives  no  credit  and  his  customers 
do  not  haggle. 

The  city  of  Paris  adopted,  by  advice  of  Baron  Haus- 
man,  in  1853,  a  rule  which  prevented  the  erection  of  build- 
ings of  excessive  height  and  of  an  architecture  which  did 
not  conform  to  the  surroundings.  Of  these  rules,  which 
made  the  French  capital  so  attractive,  the  former  would 
have  been  difficult  to  enforce  below  Chambers  Street,  but 
both  of  them  should  have  been  required  from  occupants  of 


THE  WOOLWORTH  BUILDING 

The  Wool  worth  Building,  completed  in  1 9 1 3 »  is  thc'  highest 
structure  ever  reared  for  commercial  purposes,  and  is  said  to  be 
the  highest  erected  anywl  ept  the  Eiffel  Tower  in  Paris. 

The  edifici  »ove  the  street  and  has  55  stories, 

rtors.    The  cost  war-  ;.ooo,- 

000.  The  owner  of  the  property,  Mr.  Frank  W.  Woolworth,  is 
the  iv  merchant  who  has  built  up  a  chain  of  about  six 

hundred  five-  and  ten-cei  here  given  coml  »ined 

in  an  inter  old  with  the  new,  by  showing  the  land- 

mark of  St.  Paul's  Church  and  the  old  Astor  House,  which  at  the 
time  the  view  was  taken  had  closed  as  a  hotel  and  was  on  the 
point  of  being  pulled  down. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        357 

lots  on  Broadway  above, — at  least  as  far  as  Grace  Church. 
The  steeple  of  that  church  long  consisted  of  a  wooden 
imitation  of  marble,  until  funds  to  finish  the  structure  in 
stone  became  available.  The  congregation  has  always  been 
exclusive,  and  it  was  difficult  for  a  stranger  to  secure  a  seat 
in  a  good  pew.  Anson  Burlingame  once  waited  some 
time  before  J.  H.  Brown,  the  pompous  sexton,  conducted 
him  to  a  seat.  When  he  recognized  one  of  his  own  flock, 
that  same  Mr.  Brown  was  attentive  enough.  He  was  con- 
sulted by  young  ladies  of  the  congregation  whom  to  invite 
to  their  parties. 

The  tower  of  the  Metropolitan  Life  building  vies  with 
the  Venetian  Campanile,  in  beauty,  a  charm  which  makes 
the  ugliness  of  other  skyscrapers  more  striking.  It  would 
be  hard  to  find  elsewhere  a  more  inharmonious  aggregation 
of  styles. 

The  height  of  the  Broadway  buildings  varies  between 
two  and  twenty  stories.  Of  the  tallest  many  look  like 
huge  packing  boxes  with  glass-covered  holes,  set  up  on  ends. 
Very  few  have  architectural  merit;  they  conduct  passing 
storms  from  the  sky  above  to  the  street  below  where  they 
raise  dust  and  litter. 

Here  are  some  instances  of  the  want  of  uniformity 
among  Broadway  buildings: 

The  former  home  of  Charles  Scribner's  Sons,  743  Broad- 
way, a  wide  four-story  brick  building,  has  for  its  neighbor 
a  five-story  house,  with  an  iron  front  next  to  it;  then  ad- 
joining to  the  south,  comes  a  seven-story  house  then  a  six- 
story  brick,  used  by  hairdressers,  who  provide  old  cats 
with  steamed  rats  and  young  witches  with  long  switches, 
then  follows  the  "Anderson"  twelve-story  loft,  occupied 
by  "  King  Button,"  on  the  corner  of  Waverly  Place,  the 
roofs  having  the  aspect  of  huge  stepping  stones.  There  is 
a  fourteen-story  granite  loft  on  the  southwest  corner  of 


358  PROGRESS  OF  THE   EMPIRE   STATE 

Twelfth  Street,  and  a  reconstructed  two-story  dwelling  next 
door,  with  a  cheap  restaurant  on  the  ground  floor,  while 
the  upper  story  is  used  by  Mme.  Mandelkern,  a  French 
dressmaker.  The  block  is  completed  by  the  iron  warehouse 
which  James  McCreery  occupied,  which  now  overshadows  an 
Austrian  bakery. 

Some  sites  along  Broadway  have  become  famous  by 
the  memories  of  their  past.  The  skyscraper  on  the  north- 
west corner  of  Broadway  and  Chambers  Street  covers  the 
ground  of  the  Irving  House,  where  Jenny  Lind  resided. 
The  marble  halls  of  the  New  York  Life  Building,  between 
Catharine  Lane  and  Leonard  Street,  occupy  the  block  of 
the  venerable  "Society  Library."  On  the  west  side  of 
Broadway,  corner  of  Spring  Street,  two  hotels  flourished. 
North  of  Spring  Street  was  the  Prescott,  a  German  house 
kept  by  Diez,  where  Theodore  Wachtel,  Marie  Geistinger, 
and  Bogoumil  Davison  stopped;  south  of  Spring  Street 
was  the  St.  Nicholas,  a  famous  commercial  hotel,  where 
James  Gordon  Bennett  boarded.  The  sites  of  the  Metro- 
politan Hotel,  on  the  east  side  of  Broadway,  corner  of 
Spring  Street,  and  of  Niblo's  Garden,  are  absorbed  by  the 
Metropolitan  commercial  building.  Adelina  Patti  made 
"her  first  bow  to  a  New  York  public"  in  Niblo's;  here  the 
Ravels  played,  The  Black  Crook  was  presented,  and  Madame 
Rachel  acted  Adrienne  Lecouvreur. 

The  Cable  Building,  northwest  corner  of  Houston 
Street,  replaces  St.  Thomas's  Church;  next  door  above  was 
Henry  Maillard,  Taylor's  French  successor,  across  the  way 
from  Laura  Keene's  Theater.  Opposite  Bond  Street  was 
the  "Winter  Garden."  Burton  moved  here  from  Chamber 
Street,  and  Edwin  Booth  played  before  he  built  his  own 
"temple"  on  the  southeast  corner  of  Twenty-third  Street 
and  Sixth  Avenue.  In  the  Winter  Garden  Boucicault 
played  The  Cricket  on  the  Hearth  and  Joe  Jefferson  played 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        359 

Bob  Acres,  and  Rip  Van  Winkle.     Here  Sothern  represented 
Our  American  Cousin  and  John  E.  Owen  Solon  Shingle. 

Aside  from  those  mentioned  and  some  ordinary  minstrels 
called  "Jim  Crows,"  the  following  theaters  were  of  import- 
ance: 

The  "National"  on  Chatham  Square  where  Forrest 
played  Othello,  and  where  the  first  representation  of  Uncle 
Tom  s  Cabin  took  place. 

In  the  "Stadt  Theater"  on  the  east  side  of  the  lower 
Bowery,  classic  German  plays  were  given  in  German. 
The  Mulligan  Guards  frightened  the  audience  by  dancing 
through  the  ceiling. 

Lester  Wallack  gave  the  best  English  plays  on  Broadway 
and  Thirteenth  Street. 

In  the  upper  gallery  of  the  Academy  of  Music  on  Four- 
teenth Street,  we  could  listen  to  the  sweet  notes  of  "Mario 
and  Grisi"  for  a  couple  of  shillings. 

The  Grand  Opera-House  erected  by  the  Erie  Railroad 
on  the  northwest  corner  of  Eighth  Avenue  and  Twenty- 
Third  Street  reminds  one  of  the  sad  fate  of  James  Fisk, 
who  was  killed  by  Edward  Stokes  because  the  frail  Josie 
Mansfield  gave  Fisk  the  preference. 

Several  theaters  are  dedicated  to  plays  in  foreign  tongues, 
like  the  Irving  on  Irving  Place  for  Germans.  A  large 
Yiddish  theater  on  Houston  Street  facing  Second  Avenue 
is  of  recent  origin. 

The  square  fronting  the  west  side  of  Broadway  between 
Washington  and  Waverly  Places  was  called  Shinbone 
alley  while  the  Potter's  field  was  the  site  where  our 
popular  New  York  Hotel  stood  so  long;  it  was  a  homely 
brick  tavern  with  wide  balconies.  Our  oldest  New  York 
families  boarded  here.  Jefferson  Davis  and  numerous 
Southern  friends  found  a  hearty  welcome  when  they  came. 
Randolph  Guggenheimer  placed  on  this  site  a  loft  structure. 


360  PROGRESS  OF  THE    EMPIRE   STATE 

The  granite  front  has  the  aspect  of  a  huge  chessboard,  every 
square  being  surrounded  with  gilt  lettered  signs  of  its 
occupants. 

"Good  wine  needs  no  bush."  Mr.  Stewart  had  no 
signboard  over  his  door,  yet  every  woman  knew  how  to  find 
him.  No  mark  indicates  the  entrance  to  our  City  Bank, 
still  every  boy  knows  it.  Signs  which  occupants  of  build- 
ings flaunt  along  Broadway  are  more  curious  than  helpful. 
Anxiety  for  business  exceeds  their  tenants'  discretion.  Here 
are  specimens  of  the  equivocal: 

"Distribution  of  favors  and  kisses  to  liberal  customers 
by  charming  women." 

"Cotillion  favors  and  souvenirs  d'amour  by  Mesdames 
Rosenbloom  and  Veilchenblau." 

"  Members'  entrance  to  the  Mutual  Underwear  Society. " 

"Orbits  painted  by  black  eyed  Susan." 

"Jobs  in  knee  pants  by  Pumpernickel  and  Roggenbrod." 

"Pantalette  Clearing  House." 

More  ingeniously  pointed  are: 

'The  Overcoat  Construction  Co.  does  not  conflict  with 
provisions  of  the  Sherman  Act." 

"Glass  eyes  and  rubber  noses  fitted  by  Langnaas,  while 
you  wait." 

"Lids  for  kids"  (boys'  caps). 

"Sweaters,  veils,  and  goggles  for  joy  riders." 

"  Brain  brokers'  development  of  your  ideas." 

"  Patent  mosquito  cages." 

"  Rinaldini's  rough  rider  and  buster  suits." 

Attics  of  many  tall  buildings  on  upper  Broadway,  dis- 
figured by  such  announcements,  are  comparatively  empty, 
and  their  useful  occupation  is  problematical.  Time  would 
be  opportune  to  let  the  city  take  the  superfluous  stories 
down,  enforcing  reduction  of  the  height  so  as  to  make  it 
conform  to  the  width  of  the  street.     The  increased  value  of 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        3"I 

the  remainder  would  compensate  for  reduced  floor  space. 
In  conjunction  with  the  timely  abolition  of  impediments  of 
sidewalks,  Broadway  might  yet  become  one  of  the  most 
beautiful  streets  on  earth. 

Fires  occurred  frequently  sixty  years  ago,  chiefly  because 
many  warehouses  were  poorly  constructed,  but  insurance 
was  expensive  and  not  always  reliable.  Of  sixty  companies, 
with  an  aggregate  capital  of  twelve  and  three  quarter 
millions,  only  sixteen  remained  in  1910.  Their  capital, 
which  amounted  in  1853  to  #3,810,000,  now  amounts  to 
$10,600,004.     This  includes  capital  increases  by  the 

Continental  from  $500,000  to  $2,000,000, 

Home                         500,000  "      3,000,000 

Hanover                    150,000  "      1,000,000 

Niagara                     200,000  "      1,000,000 

The  disappearance  of  nine  millions  of  the  capital,  shown 
by  this  comparison,  aside  from  assessments,  which  became 
necessary  on  the  occurrence  of  conflagrations,  is  accounted 
for  by  losses  and  improvident  management.  Not  all  the 
capital  of  the  old-time  companies  was  paid  in  in  cash, — a  part 
consisted  of  notes  of  directors,  who  never  expected  losses 
which  might  compel  them  to  redeem  these  notes.  They 
did  not  appreciate  the  necessity  of  reserves,  but  divided 
premiums  among  themselves  and  other  stockholders  as 
soon  almost  as  they  were  received. 

Any  large  fire,  like  the  one  of  1835,  when  650  buildings 
and  merchandise  valued  at  twenty  million  dollars  were 
destroyed,  was  apt  to  ruin  such  companies.  Many  were 
founded  to  create  places  as  officers  and  directors  for  those 
who  subscribed  to  the  capital,  without  reference  to  their 
ability  or  attention.  It  happened  to  the  vice-president 
of   one,  a   wealthy  old   gentleman,  who  came  to  read  the 


362  PROGRESS  OF  THE    EMPIRE   STATE 

daily  papers  at  his  desk,  that  he  noticed  the  clerks  busy 
carrying  ledgers  to  the  door.  He  beckoned  to  one  for  an 
explanation,  and  fell  from  his  chair  when  he  heard  that  the 
company  had  failed. 

The  nominal  surplus  of  the  sixty-two  companies  which 
existed  in  1853  was  #2,567,077.59  over  and  above  their 
combined  capital  of  #3,810,000.  The  capital  and  surplus 
of  the  sixteen  companies,  which  continued  to  exist  in  1910 
were: 

Capital,    #10,600,004.00 
Surplus,      34>336,348-93 

or  forty-four  millions  assets  now  against  six  and  a  quarter 
millions  sixty  years  ago. 

To  these  sixteen  have  been  added  nineteen  other  com- 
panies, with  an  aggregate 

Capital  of  #  9,650,000.00 

and  a  surplus  of      24,280,627.62 
the  most  important  additions  being  the  German-American, 
Germania  Fire,  the  Queens  Insurance  Company  of  America, 
and  the  Fidelity-Phoenix  Fire,  making  a  total  for  the  entire 
thirty-five  companies  of: 

Capital,      #20,250,004.00 
Surplus,        58,616,976.55 

The  following  three  became  the  most  successful  Ameri- 
can companies: 

The  "Home"  under  the  able  management  of  Messrs. 
D.  A.  Heald,  John  H.  Washburn,  and  Ellridge  Gerry  Snow. 

The  "Continental"  under  Messrs.  George  T.  Hope, 
Francis  C.  Moore,  and  Henry  Evans;  Mr.  Hope  was  pro- 
minent amongst  exempt  firemen.  The  "German-Ameri- 
can,"   under    the    careful    supervision    of    Messrs.  J.   W. 


ELBRIDGE  GERRY  SNOW 

President  Home  Insurance  Co.;  born  in  Barkhamsted,  Coryi., 
January  22,  1K41 ;  educated  district  and  high  schools,  and  gradu- 
ated Fort  Edward  Institute;  married  in  Waterbury,  Conn., 
September  5,  1S65,  Frances  J.  Thompson.  After  leaving  school, 
studied  law  and  later  entered  insurance  agency  in  Connecticut; 
in  1862,  became  clerk  in  the  main  office  of  the  Home  Insurance 
( '<).,  where  he  remained  nine  years,  then  became  state  agent  of  the 
company  for  Massachusetts,  and  also  with  J.  Edward  Hollis,  in 
insurance  firm  of  Hollis  &  Snow;  represented  several  other 
companies  as  local  agent  in  Boston,  until  1885,  when  he  came 
again  to  New  York  City  as  secretary  of  the  Home  Insurance  Co., 
and  subsequently  became  vice-president  and  president  of  the 
company.  Director  of  North  River  Savings  Bank;  trustee  New 
York  Life  Insurance  Co.  and  other  New  York  corporations. 
Member  American  Museum  of  Natural  History,  New  England 
Society,  Independent  Order  of  Odd  Fellows,  Municipal  Art 
Society,  Mayflower  Society. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        363 

Murray,  Ernest  L.  Allen,  and  William  N.  Kremer.  All 
three  companies  have  been  punctual  in  the  payment  in 
full  of  all  their  losses,  those  of  San  Francisco  included. 

It  was  customary  for  a  merchant  personally  to  visit 
the  companies  he  believed  in  and  place  his  insurance  where 
he  could  get  the  best  policy  at  the  lowest  price.  The  writer 
kept  his  own  expiration  book,  and  was  received  with  wel- 
come smiles  when  he  paid  an  annual  visit  to  the  officers 
to  renew  his  policies.  Brokers  were  then  considered  the 
parasites  of  insurance.  Since  the  business  has  assumed 
large  proportions  so  that  merchants  can  no  longer  attend 
to  it  personally,  brokers  have  made  themselves  more  than 
useful  by  their  knowledge,  which  they  employ  for  the 
benefit  of  their  clients. 

Up  to  1865  we  relied  on  volunteers,  exempt  from  the 
payment  of  taxes  and  from  civic  duties,  to  extinguish  fires. 
Bells  gave  the  alarms,  and  members  responded  at  all  times 
of  the  day  and  night.  Every  company  was  eager  to  get 
ahead  of  every  other  company,  so  as  to  reach  and  extinguish 
the  fire  first.  This  rivalry  resulted  occasionally  in  disorder. 
While  members  quarreled  over  precedence,  they  some- 
times allowed  the  flames  free  play.  But  when  a  fire  was 
peaceably  extinguished,  the  brave  fighters  were  invited  by 
neighbors  to  partake  of  refreshments.  The  volunteers 
were  actuated  by  benevolence  and  impelled  by  emulation; 
to  extinguish  a  fire  had  for  them  a  strange  fascination. 

The  social  intercourse  between  members  was  pleasant. 
Some  of  our  best  citizens  took  a  pride  in  belonging  to  favorite 
companies.  Amongst  them  were  two  bank  presidents,  Wil- 
liam L.  Jenkins  of  the  Bank  of  America,  and  William  H. 
Macy  of  the  Seamen's  Bank  for  Savings;  Jordan  L.  Mott, 
the  iron  master;  of  ship  builders,  William  H.  Webb  who 
launched  more  tonnage  than  any  other  American;  and 
erected  for  aged    ship   carpenters,  at  Fordham,  the  home 


364  PROGRESS  OF  THE   EMPIRE   STATE 

which  bears  his  name;  George  and  James  R.  Steers,  who 
built  famous  yachts  and  steamers  of  the  Collins  Line. 

Other  volunteer  firemen  were:  Solomon  Kip  and  Albert 
Brown,  who  owned  the  Broadway  stages;  Albert  J.  Delatour, 
who  cooled  off  the  heads  of  speculators  with  soda-water  at 
25  Wall  Street;  James  Y.  Watkins,  the  house  furnisher  of 
Catherine  St.;  ex-Mayor  Daniel  F.  Tieman;  the  brothers 
Harper,  born  in  Newtown,  the  Second  Ward  of  Queens, 
who  became  famous  publishers;  Thurlow  Weed,  the  jour- 
nalist and  politician;  William  H.  Wickham,  Dr.  Hosack, 
Cornelius  W.  Lawrence,  W.  H.  Appleton,  the  publisher, 
A.  W.  Spies,  gun  importer;  Lorenzo  Delmonico,  Police 
Inspector  Byrnes,  were  all  connected  with  our  Exempt 
Fire  Department.  Firemen's  balls  were  of  social  im- 
portance, and  attended  by  our  best  families.  On  one 
of  these  occasions,  Cyrus  W.  Field  appeared  in  the  full 
uniform  of  a  policeman.  He  wanted  to  demonstrate  that 
he  was  not  too  proud  to  wear  the  city's  livery,  and  by 
this  act  he  overcame  the  repugnance  of  guardians  of  the 
peace  who  refused  to  don  it. 

On  the  outbreak  of  our  Civil  War  a  regiment  of  firemen 
Zouaves  was  formed  and  sent  to  the  front  under  command 
of  Colonel  Elmer  W.  Ellsworth.  When  called  upon  to 
save  life  or  property  our  firemen  never  shirked  danger. 
Young  volunteers  who  were  ambitious  to  be  enrolled  slept 
on  the  bare  floors  of  the  engine  houses,  and  were  broken  to 
endure  smoke;  after  filling  their  boots  with  brandy  they  some- 
times helped  to  extinguish  eight  fires  within  twenty-four 
hours.  When  it  was  found  that  volunteers  could  not 
always  be  relied  upon,  and  when  the  accumulation  of  valu- 
able goods  in  congested  districts  made  prompt  action 
imperative,  the  present  system  of  a  paid  department  was 
inaugurated.  The  men  combine  with  bravery  a  thorough 
knowledge  of  modern  appliances,  including  the  high   pres- 


THE  COMMERCIAL  PROCRESS  OF  GOTHAM        365 

sure,  which   in   most  cases    they    have    been    able   to   use 
effectively. 

Few  of  our  marine  underwriters  have  prospered.  Most 
of  them  have  taken  greater  risks  than  circumstances  justi- 
fied, and  they  lost  instead  of  making  money.  Horace  J. 
Moody  of  the  "Pacific"  was  of  the  most  venturesome. 
B.  C.  Morris,  president  of  the  "Columbia,"  paid  five  per- 
cent, only  of  adjusted  claims  for  losses.  All  of  the  following 
companies  were  obliged  to  liquidate: 

The  "Mutual"  Insurance  Co.,  incorporated  in  1832, 
managed  by  Mr.  John  Delafield,  who  brought  the  first  copy 
of  our  treaty  of  peace  with  England  when  he  landed.  He 
lived  in  Ravenswood,  and  was  a  director  of  the  New  York 
branch  of  the  "  Bank  of  the  United  States. " 

Colonel  Richard  Lathers  from  Charleston,  S.  C,  was 
long  president  of  the  "Great  Western. "  He  made  strenuous 
efforts  to  reconcile  the  South  when  Lincoln  became  Presi- 
dent; for  this  patriotism  he  was  greatly  esteemed  in  the 
North.  Owning  a  fine  estate  in  New  Rochelle,  he  lived  and 
died  at  248  Central  Park  West,  after  having  entertained 
there  some  of  the  best  people  of  the  reunited  country. 
Over  the  door  of  his  downtown  office  hung  this  quaint  sign: 

Richard 
Lathers 
Smith 
Shaves 

Smith,  a  relative  of  Commodore  Vanderbilt,  discounted 
notes  at  stiff  rates  in  the  same  building. 

The  "Orient  Mutual"  was  managed  by  Eugene  Dutilh. 
When  he  himself  was  obliged  to  fail,  he  paid  American 
creditors  in  full. 

The  "National  Lloyds,"  managed  by  Arthur  Leary,  who 
was  a  devoted  friend  of  Mrs.  Paran  Stevens,  the  gay  and 
festive  widow  of  the  Boston  "Revere"  house. 


366  PROGRESS  OF  THE   EMPIRE   STATE 

The  "New  York  Mutual,"  which  was  presided  over  by 
T.  B.  Bleecker  of  the  old  New  York  family. 

Even  the  "Sun  Mutual"  was  compelled  to  quit  in  spite 
of  the  long  and  careful  management  of  John  P.  Paulison. 

That  the  "Atlantic  Mutual,"  established  in  1842,  sur- 
vives other  American  marine  insurance  companies  is 
chiefly  due  to  A.  A.  Raven,  its  president,  and  to  his  prede- 
cessors. At  the  Warehouse  fire  in  1845  a  number  of  under- 
writers, who  had  insured  against  both  fire  and  marine  losses, 
had  to  fail,  and  the  "Atlantic"  acquired  the  best  portion  of 
the  latter  business.  This  company  also  had  the  foresight 
to  purchase  government  bonds  at  the  low  prices  which 
prevailed  at  the  beginning  of  our  Civil  War. 

Following  the  action  of  the  London  Lloyd's,  American 
companies  have  begun  to  insure  against  almost  everything — 
against  losses  caused  by  depression  of  trade;  against  all 
accidents  to  automobiles  and  to  their  owners;  against  every 
loss  on  merchandise  during  transportation,  such  as  leakage, 
theft,  and  depreciation  of  the  value  of  fashionable  dry  goods ; 
against  loss  sustained  by  caterers  and  other  purveyors  in 
consequence  of  bad  weather,  and  against  tornadoes. 

Before  1863,  when  the  national  banking  system  was 
invented,  our  medium  of  exchange  consisted  of  coin,  and 
State  bank  notes,  the  value  of  which  fluctuated.  John 
Thompson,  2  Wall  Street,  predecessor  of  the  First  National 
Bank,  was  the  best  judge  of  their  value.  He  published  the 
Bank  Note  Detector,  a  weekly  newspaper,  which  was 
more  indispensable  to  receivers  of  money  than  Bible  and 
prayer  book.  It  contained  the  rates  of  discount  at  which 
issues  of  banks  in  different  parts  of  the  country  were  accept- 
able, which  varied  from  one  half  per  cent,  for  Eastern  bills  to 
5  per  cent,  for  "  wildcat "  notes.  Values  of  notes  of  suspended 
banks  and  descriptions  of  the  last  discovered  counterfeit 
notes  were  published  and  hawked  in  extra  editions  along  our 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        367 

streets.  Experts  were  employed  besides  to  scrutinize  the 
notes.  When  the  cashier  was  in  doubt,  he  required  the 
written  endorsement  of  a  responsible  party.  Receipts  of 
the  day  were  taken  to  the  nearest  broker, — like  Joe  Hough, 
succeeded  by  Benjamin  F.  Maniere,  under  Barnum's 
Museum,  to  obtain  checks  for  what  he  approved.  Maniere 
became  Police  Commissioner. 

Locations  of  "wildcat"  banks  were  generally  mysterious, 
and  always  distant.  A  large  amount  of  the  issues  of  one  of 
those  banks  had  been  accumulated  by  a  shrewd  broker,  who 
decided  to  present  them  personally  at  the  bank.  After  a 
careful  search,  he  discovered  finally  a  log  cabin  at  a  railroad 
station  in  southern  Indiana,  over  the  door  of  which  the  sign 
of  the  bank  was  displayed.  A  polite  cashier  excused  his 
inability  to  pay  at  once, — "the  president  had  gone  to 
Chicago,  and  carried  the  cash  with  him."  It  took  the 
broker  some  days  to  find  him,  and  to  get  his  money,  but  not 
before  he  was  nearly  lynched  by  the  indignant  Hoosier 
community. 

Because  twenty  millions — some  thirty-five  tons  of 
bullion — were  required  by?the  banks  to  adjust  daily  balances, 
fifty-two  of  them  established,  October  11,  1853,  a  Clearing 
House  at  14  Wall  Street.  Here  they  met  and  adjusted  their 
mutual  obligations  in  an  hour,  avoiding  the  risk  of  transport- 
ing the  money  they  owed  each  other  through  the  public 
streets. 

When  the  South  threatened  to  secede,  and  failures  were 
a  daily  occurrence,  these  banks  agreed  to  help  each  other  by 
an  issue  of  Clearing  House  certificates.  All  members  who 
needed  assistance,  and  who  could  demonstrate  their  solvency 
to  the  others,  could  get  certificates  for  75  per  cent,  of  their 
good  assets.  For  these  issues  all  members  of  their  Clearing 
House  became  jointly  responsible,  and  the  certificates  passed 
between  them  in  settlement  of  their   mutual   obligations. 


368  PROGRESS  OF  THE   EMPIRE   STATE 

This  remedy,  adopted  by  advice  of  Mr.  George  S.  Coe, 
President  of  the  American  Exchange  Bank,  alleviated  the 
money  stringency.  It  has  since  been  resorted  to  at  the 
recurrence  of  every  panic,  and  proved  effective. 

Mr.  Coe  had  been  the  New  York  agent  of  the  Ohio  Life 
Insurance  &  Trust  Co.,  the  failure  of  which  precipitated  the 
panic  of  1857,  when  4000  failures  occurred,  involving  three 
hundred  millions.  This  panic  was  caused  by  loans  to  rail- 
roads in  course  of  construction,  and  before  the  bonds 
issued  for  construction  could  be  sold.  The  panic  pre- 
cipitated the  suspension  of  every  bank  but  the  "Chemical." 
The  writer  then  learned  his  first  financial  lessons.  He  had 
recently  established  himself;  his  capital  was  small,  he  had 
no  liabilities.  He  drew  a  hundred  dollars  in  gold  from  the 
Bank  of  New  York,  and  a  larger  amount  in  notes  from'  a 
Brooklyn  bank.  While  his  competitors  chased  impecu- 
nious creditors,  he  drank  with  a  friend,  who  had  been 
equally  fortunate,  to  failures  which  could  no  longer  disturb 
us.  To  while  away  time,  he  played  chess  with  his  book- 
keeper. The  panic  was  severe,  but  of  short  duration; 
bankers  more  than  merchants  were  affected,  and  the 
writer  began  to  extend  credit  again  to  solvent  customers 
the  following  spring. 

When  Fort  Sumter  was  bombarded  in  1861  and  the  Civil 
War  began,  almost  every  Northern  merchant  who  traded 
with  the  South  was  ruined.  The  banks  realized  that  the 
Government  could  not  borrow  sufficient  money  to  bring  the 
war  to  a  successful  end,  and  suspended  in  December,  1861, 
except  the  Chemical,  where  the  writer  kept  his  account. 
His  business  had  grown  and  included  foreign  accounts. 
Being  anxious  to  protect  his  European  creditors,  he  called 
on  the  bank  to  inquire  about  a  balance  of  some  $5000  he  had 
on  deposit.  His  mind  was  relieved  when  he  was  promptly 
assured  that  this  balance  had  been  placed  to  his  credit  in 


ANTON  ADOLPH  RAVEN 

iident  and  bank  official;  horn  Curasao,  Dutch 
ptember  30,  1833;  son  of  John  R.  and  Petronella 
(Hutchings)  Raven;  paternal  ancestry  English;  maternal  i 
tors  emigrated  from  Holland  to  New  York  and  afterwards  settled 
in  the  Dutch  West  Indies;  boyhood  spent  on  Island  of  St.  Thomas 
until  seventeen  years  old,  when  he  came  to  New  York  City; 
married  in  New  York  City,  i860,  Gertrude  Oatman;  has  four  chil- 
dren, of  whom  one,  thc'Rcv.  John  Howard  Raven,  is  professor  of 
Old  Testament  languages  and  exegesis  in  the  Theological  Semi- 
nary of  the  Reformed  Church  in  America,  at  New  Brunswick, 
.\.  J.  Became  clerk  in  office  of  Atlantic  Mutual  Insurance  Co., 
January  4,  1852;  advanced  successively  to  underwriter,  fourth 
vice-president,  thirl  president,  vice- 

president  (1895-1897),  since  then  president.  1  lonorary  vice-presi- 
dent and  trustee  of  Home  Life  Insurance  Co.;  director  Bank  of 
New  York  (N.  B.  A.),  Fidelity  &  Casualty  Co.;  trustee  Seamen's 
Bank  for  Savings  in  the  City  of  New  York;  vice-president 
American  Geographical  !  lember  American  Museum  of 

Natural  History  and  of  Metropolitan  Museum  of  Art. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        369 

gold — "because  it  had  been  as  good  as  gold  when  deposited." 
No  other  hank  was  equally  considerate.  The  action 
encouraged  the  writer  to  keep  his  books  on  a  gold  basis, 
and  taught  him  to  abstain  from  risky  ventures. 

The  difference  between  speculators  on  margin  on  the 
Stock  Exchange  and  ordinary  gamblers  is  trifling.  The 
former's  transaction  is  sanctioned  by  law,  and  may  occasion- 
ally have  been  useful  by  upholding  worthy  enterprises,  such 
as  the  extension  of  railroads.  On  the  strength  of  this  argu- 
ment speculators  on  the  bull  side  have  claimed  that  their 
efforts  to  sustain  the  market  were  patriotic  and  deserved 
encouragement.  The  facts  are,  one  class  of  speculators 
only  can  gain  what  the  other  loses,  while  buyers  and  sellers 
of  merchandise  may  both  benefit  by  their  transactions. 
When  Daniel  Drew,  a  cattle  drover,  became  a  successful 
stock  manipulator,  he  was  consulted  by  a  pretended  friend 
about  the  stock  market.  This  "friend"  did  the  opposite 
of  what  Drew  advised,  and  made  money,  until  one  day 
"Dan"  told  him  the  truth,  and  ruined  the  fellow,  who  had 
continued  the  same  policy. 

George  G.  Williams,  President  of  the  Chemical  Bank,  was 
the  son  of  a  physician  in  Haddam,  Conn.  The  remarkable 
success  of  the  bank  was  largely  due  to  his  faithful  services. 
He  lived  and  died  at  24  West  58th  Street;  his  charming 
daughter  Clara  married  Mr.  F.  B.  Keech.  Amongst  the  re- 
miniscences of  Mr.  Williams,  one  is  worth  recounting. 
While  still  cashier,  a  customer  came  to  Mr.  Williams 
and  inquired  anxiously  for  Director  Goelet.  Williams 
pointed  to  the  door  of  the  directors'  room,  but  saw  the 
customer  quickly  withdraw, — he  "could  see  only  a  man 
seated  in  shirt  sleeves,  who  mended  his  coat."  But, 
"That's  him,"  Mr.  Williams  retorted,  and  pushed  the 
customer  in  again.     When  he  took  courage  to  say  why  he 

came  and  who  sent  him,  he  received  the  money  he  wanted. 

24 


370  PROGRESS  OF  THE   EMPIRE   STATE 

Money  was  hard  to  get,  but  sometimes  it  was  harder  to 
get  change.  The  writer  remembers  a  twenty  dollar  bill  of  a 
Rochester  bank  he  could  not  get  changed  for  several  days. 
In  every  coach  or  restaurant  where  he  offered  it,  he  was 
obligingly  requested  to  pay  another  time.  Tokens  from  a 
penny  up  were  issued  by  tradesmen,  cities,  and  railroads. 
Handsomely  engraved,  they  served  at  the  same  time  as 
advertisements.  The  situation  was  relieved  when  the 
Government  issued  postal  currency  in  denominations  vary- 
ing from  five  to  fifty  cents,  ostensibly  to  purchase  postage 
stamps — in  reality  to  provide  change.  A  large  amount, 
some  ten  millions  of  this  "  money, "  has  never  been  redeemed. 

When  gold  rose  to  a  premium,  it  was  sold  by  brokers, 
first  at  their  exchange  in  a  dingy  room  called  the  "Coal 
Hole,"  on  the  southeast  corner  of  William  Street  and 
Exchange  Place,  under  the  Lackawanna  office,  and  when  the 
business  grew,  in  larger  quarters.  The  premium  fluctuated 
with  the  fortunes  of  war,  but  rose  to^no  alarming  figures, 
until  patriotic  members  of  Congress  prohibited  the  sale  in 
1863.  The  gold  room  was  closed,  but  the  premium  rose 
until  it  touched  250.  The  writer  paid  to  Trevor  &  Colgate 
260  for  a  small  amount  needed  for  duties. 

The  country  became  alarmed,  and  Congress  repealed 
the  law  quicker  than  it  passed  it.  The  speculation  in  gold, 
after  this  abortive  attempt  to  suppress  it,  became  more 
active,  and  was  continued  in  evening  sessions  at  the  Fifth 
Avenue  Hotel.  When  news  of  Sherman's  successful  march 
through  Georgia  came,  some  "copperheads,"  continued 
to  doubt.  Mr.  Tobin  offered  to  take  at  200  all  the  gold 
available  in  the  room.  When  it  was  tendered  to  him  on  the 
following  morning,  he  suspended.  After  the  war  gold 
declined  to  a  reasonable  premium,  and  rose  only  once  to  over 
150,  on  September  24,  1869,  the  memorable  "black  Friday," 
when  daring  gamblers  manipulated  it  to  depress  the  stocks. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        371 

Jay  Cooke  &  Co.  failed  September  18,  1873,  because  they 
could  not  realize  on  their  bonds  of  the  Northern  Pacific 
Railroad.  Their  suspension  made  a  deep  impression, 
because  they  had  long  been  the  financial  agents  of  the 
Government.  When  the  Union  Trust  Co.  could  not  borrow 
on  the  credit  of  the  Michigan  Southern  Road,  they  sus- 
pended September  20th.  Edward  King  of  Prime,  Ward  & 
King  became  president;  he  succeeded  in  rehabilitating  the 
company,  making  it  one  of  our  strongest  institutions. 
Prices  of  securities  fell,  so  that  the  Stock  Exchange  closed 
its  doors  for  ten  days,  and  the  banks  composing  the  Clear- 
ing House  again  pooled  their  assets.  Some  five  thou- 
sand failures  with  #230,000,000  of  liabilities  occurred   in 

1873. 

The  number  of  failures  increased  to  six  thousand  in  1874, 
but  the  liabilities  diminished  to  $150,000,000.  More  mer- 
chants and  fewer  bankers  were  involved.  The  failure  of 
Hoyt,  Sprague  &  Co.,  with  debts  of  #10,000,000,  took  place 
in  1874.  They  made  print  cloths  in  Providence,  and  sold 
them  in  Franklin  Street.  William  Sprague,  Senator  for 
Rhode  Island,  had  married  the  accomplished  daughter  of 
Salmon  P.  Chase.  A.  D.  Juilliard,  a  patron  of  art,  became 
receiver.  Mrs.  Juilliard  is  known  as  a  contributor  to 
charities. 

Fred  Gebhard  came  from  Germany  in  the  early  years  of 
last  century.  Established  in  lower  Greenwich  Street  with 
Fred.  Schuchardt,  his  kinsman,  under  the  name  of  Gebhard 
&  Schuchardt,  he  sold  swan  gin,  hardware  and  furs.  When 
they  became  bankers,  and  moved  to  21  Nassau  Street,  they 
continued  to  sell  merchandise  on  commission.  The  Geb- 
hards  left,  and  Schuchardt  took  a  son-in-law  as  partner. 
Imprudent  loans  to  railroads  compelled  the  firm  to  fail  in 
Exchange  Place  in  1875.  Fred  Gebhard,  grandson  of  the 
founder,  became  infatuated  with  Mrs.  Langtry,   the  hand- 


372 


PROGRESS  OF  THE   EMPIRE   STATE 


some  actress,  called  the  " Jersey  Lily"  when  she  visited 
this  country. 

During  the  following  years,  as  commodities  and  securities 
continued  to  decline,  some  of  our  best  houses  failed.  In 
1875  Duncan,  Sherman  &  Co.  became  involved  by  the 
decline  of  cotton.  When  the  combination  of  anthracite 
coal  miners  collapsed,  their  accumulated  stocks  were  sold 
at  auction  by  J.  H.,  son  of  Simeon  Draper. 

There  were  ten  thousand  failures  in  1878  with  liabilities 
of  #234,000,000,  and  the  depression  continued.  The  noon- 
day meetings  in  our  downtown  churches  were  crowded — but 
prayers  could  not  restore  confidence;  the  resumption  of 
specie  payment  did,  when  in  January,  1879,  it  became  a 
fait  accompli.  When  we  found  how  readily  we  could 
turn  our  bills  receivable  into  cash,  we  took  since  1873 
advantage  of  the  low  rates  which  prevailed  these  lean  years 
for  exchange,  and  recouped  many  of  our  losses  through 
rebates  on  sterling  drafts. 

Our  prominent  foreign  bankers  then  were: 

August  Belmont,  who  came  as  agent  of  the  Rothschilds 
from  Frankfort,  married  Commodore  Perry's  daughter, 
and  was  sent  as  minister  to  The  Hague  by  Franklin  Pierce. 
He  was  irritable,  but  a  strong  man  of  good  judgment.  His 
son,  bearing  the  same  name,  who  continues  the  business, 
has  inherited  his  father's  sterling  qualities. 

L.  von  Hoffmann  &  Co.  were  distinguished  by  extreme 
caution.  In  1857  they  withdrew  from  the  banks  what 
balances  they  had,  and  locked  the  money  in  their  office 
safes  in  the  Post  Building.  One  of  the  two  brothers  slept 
alternately  with  the  other,  with  loaded  pistols  in  the  rooms, 
and  so  continued  until  the  banks  resumed.  Marquis  de 
Mores,  the  French  nobleman,  who  married  von  Hoffmann's 
daughter,  became  a  rancher,  and  astonished  the  Western 
cowboys  by  his  eccentricities. 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        373 

When  Franz  Martin  Drechsler  Americanized  his  German 
name,  and  opened  in  Philadelphia  as  F.  M.  Drexel  in  1837  a 
JVechsclstubc,  he  did  not  dream  of  the  power  his  successors 
would  exercise.  Besides  the  old  Philadelphia  firm,  there  is 
John  Pierpont  Morgan,  the  "  Jupiter  Tonans"  of  Wall  Street, 
as  Mathew  Marshall  called  him;  Drexel,  Harjes  &  Co.  in 
Paris,  and  Morgan,  Grenfell  &  Co.  in  London. 

Eugene  Kelly  &  Co.  laid  the  foundation  to  their  fortune 
in  California  under  the  firm  name  of  Donohoe,  Kelly  &  Co. 
Punctilious  in  business,  Mr.  Kelly  had  the  most  kindly 
disposition  toward  worthy  sufferers,  the  Catholics  especially. 

J.  &  W.  Seligman,  also  California  merchants,  dealt  in 
notions  in  Vesey  Street,  under  the  name  of  Seligman  & 
Stettheimer.  They  weathered  the  financial  storm  of  1857, 
became  bankers  and  fiscal  agents  of  the  Government. 
Brown  Bros.  &  Co.  began  business  as  linen  importers  under 
the  name  of  Alexander  Brown  &  Sons.  Heidelbach,  Gans  & 
Co.,  predecessors  of  Heidelbach,  Ickelheimer  &  Co.,  origin- 
ally were  merchants;   so  were  the  following  firms: 

Knauth,  Nachod  &  Kuhne. 

Philipp  Speyer  &  Co.,  predecessors  of  Speyer  &  Co. 

Schulz  &  Bleidorn,  predecessors  of  Schulz  &  Ruckgaber, 
agents  for  John  Berenberg,  Gossler  &  Co.,  in  Hamburg. 

Ballin  &  Sander  relinquished  their  import  business  in 
1852  to  become  bankers.  Eugene  Ballin  assisted  Philipy 
Bissinger  in  founding  the  German  Savings  Bank.  He  was 
proud  of  his  artistic  mustache,  his  Henri  quatre,  and  of  his 
membership  in  the  Old  Guard.  No  picture  of  Mr.  Ballin, 
except  in  uniform,  has  ever  been  taken. 

Wm.  Schall,  besides  being  a  good  banker,  was  a  genial 
companion.  His  son  continues  the  firm  under  the  name  of 
Muller,  Schall  &  Co. 

The  Hallgarten  firm  was  founded  by  Hallgarten  & 
Herzfeld  in  the  basement  of  4  Hanover  Street,  where  they 


374  PROGRESS  OF  THE   EMPIRE   STATE 

"shaved"  notes, — the  old  gentleman  received  customers  in 
his  shirt  sleeves.  His  son  Adolf  was  partner  of  Lanman  & 
Kemp. 

M.  Putzel,  who  also  bought  notes,  took  Goldman  for 
his  partner.  Their  successors,  Goldman,  Sachs  &  Co.  have 
become  large  international  bankers,  like  Lazard  Freres. 

Of  the  older  generation,  Wm.  &  John  O'Brien  and  E. 
Pavenstedt  &  Schumacher  discontinued;  Meyer  &  Stucken 
are  succeeded  by  H.  Amy  &  Co. 

The  serial  successors  of  G.  vom  Bauer  were: — Marcuse  & 
Baltzer,  Baltzer  &  Taaks,  and  Taaks  &  Lichtenstein. 
Paul  Lichtenstein  in  the  firm  of  Ladenburg,  Thalmann  &  Co. 
is  the  only  survivor. 

Of  merchants  who  could  sell  their  "clean"  bills  of 
exchange,  (without  documents),  the  following  deserve 
mention: 

Christian  Boers,  agent  for  Nottebohm  Freres,  Antwerp, 
and  also  the  chief  exporters  of  petroleum  before  the  Standard 
Oil  Company  drove  them  out  of  business. 

Meissner  &  Ackermann,  who  became  export  agents  for 
John  D.  Rockefeller,  and  who  were  large  exporters  of 
cotton. 

Knoop,  Hanemann  &  Co.,  agents  for  Gebriider  Knoop, 
cotton  spinners  in  Moscow,  Russia.  Hanemann  drew  on 
De  Jersey  in  Manchester. 

De  Rham  &  Co. 

Alfred  Merian. 

Hennings,  Miiller  &  Gosling. 

Ehrich  Meyer,  successor  to  F.  W.  Kriege  &  Meyer,  who 
shipped  naval  stores.     Chief  exporters  of  tobacco  were: 

Hermann  Koop  &  Co.,  William  Street. 

Simes  &  Hiiffer,  Stone  Street,  and  their  serial  successors: 
Leopold  Hiiffer;  Hiiffer,  Toel  &  Co.;  Toel,  Rose  &  Co. 
They  all  were  agents  of  Wm.  Hiiffer  from  Miinster,  who 


^jQSfc&tA^ 


ELLIS  GRAY  RICHARDS 

Fire  insurance  specialist;  born  in  Worcester,  Mass.,  December 
1 6,  1848,  and  educated  in  that  city.  Has  been  in  the  business  of 
fire  insurance  for  nearly  forty  years,  being  manager  of  the  United 
States  branch  of  the  North  British  &  Mercantile  Insurance  Co 
of  London  and  Edinburgh.  His  earlier  years  in  his  business  were 
spent  in  Worcester  and  Boston.  Removed  to  Hartford,  Conn., 
in  May,  1887,  and  until  the  close  of  1899  was  vice-president  and 
secretary  of  the  National  Fire  Insurance  Co.  of  Hartford.  Mr. 
Richards  is  president  of  the  North  British  &  Mercantile  Insurance 
Co.  of  New  York  and  also  of  the  Commonwealth  Insurance  Co.  of 
New  York,  as  well  as  a  director  in  both  companies.  His  present 
busmess  relations  were  commenced  in  January  1,  1900.  He  is 
also  vice-president  of  the  National  Board  of  Fire  Underwriters 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM        375 

became  purchaser  of  tobacco  for  the  French  Government, 
which  has  the  monopoly  of  the  weed  in  all  French  possessions. 

Recknagel  &  Co.,  successors  to  Recknagel  &  Schwab, 
and  Fischer  &  Keller  exported  drugs.  Carl  L.  Recknagel 
considered  merchandise  safe  to  speculate  in,  because  it  was 
difficult  to  sell! 

Ralli  Bros. ;   Barnsdorf  &  Co. 

P.  C.  Rodochanachi,  succeeded  by  Munzinger  &  Co. 

Stursberg  &  Ruperti,  successors  to  Janssen,  Schmidt  & 
Ruperti.  This  firm  originally  was  established  early  in  the 
nineteenth  century  by  J.  W.  Schmidt,  the  Prussian  Consul- 
General. 

Bunge,  Burlage  &  Co.  were  agents  for  Burlage  &  Co.  in 
Antwerp. 

Edward  Bech  &  Kunhardt,  69  West  Street,  were  suc- 
ceeded by  Kunhardt  &  Co.,  who  have  been  agents  until 
1888  for  the  Hamburg  Line  of  steamers.  They  did,  and 
continue  to  do,  a  large  West  India  business.  The  charming 
manners  of  Mr.  George  E.  Kunhardt  brought  hosts  of  friends 
to  his  firm. 

Shippers  sold  their  bills  to  bankers  for  cash,  payable 
against  delivery  of  documents,  on  the  sailing  day  of  mail 
steamers.  Brokers  who  negotiated  these  sales  received 
commissions  of  one  eighth  per  cent,  for  the  sale  of  English, 
and  one  quarter  per  cent,  for  continental  bills, — rates  which 
seem  exorbitant  now. 

Bankers,  merchants,  and  brokers  who  dealt  with  foreign 
countries  were,  with  few  exceptions,  Germans.  In  their 
anxiety  for  business,  brokers  bought  what  bills  the  respective 
firm  had  to  draw  during  the  week.  This  was  legitimate  for 
brokers  who  had  funds  to  carry  what  bills  they  did  not  sell. 

They  included  fifty  years  ago: 

Brockelmann,  Unger  &  Co.,  succeeded  by  Charles  Unger, 
now  F.  S.  Smithers  &  Co. 


376  PROGRESS  OF  THE    EMPIRE   STATE 

George  Wortherspoon ;  Kamlah,  Sauer  &  Co.  Mr.  Sauer 
became  president  of  the  German-American  Bank. 

Daniel  H.  Greffe;  Rodewald  &  Winterhoff;  Henry 
Verhuven,  who  are  dead.  Greffe  lost  his  fortune  by  the 
failure  of  Schepeler,  the  Russian  merchant,  who  negotiated 
for  W.  H.  Seward  our  purchase  of  Alaska. 

Many  smaller  brokers,  who  had  been  unfortunate  in  other 
callings,  resorted  to  the  sale  of  bills.  One  portly  gentleman, 
who  had  to  visit  Carlsbad  while  he  was  a  banker,  became 
slender  after  he  failed.  When  he  was  compelled  to  go  from 
house  to  house,  to  sell  bills  to  his  former  competitors,  he 
needed  no  other  cure.  Some  impecunious  brokers,  who  had 
the  temerity  to  buy  bills  before  they  sold  them,  got  into 
trouble  when  Friday  came  and  they  had  no  means  to  pay. 
The  writer,  known  as  a  buyer,  evaded  the  Broad  Street  block, 
where  brokers  congregated,  so  as  not  to  be  importuned. 
One  of  them,  who  had  a  violent  temper,  and  who  exerted  a 
magnetic  influence,  could  not  pronounce  the  letter  "  1. "  He 
spoke  of  Hagen  &  Billings  as  "bunion"  dealers  when  we 
declined  once  to  buy  his  drafts  on  Hamburg;  we  appeased 
his  anger  by  the  purchase  of  his  dog.  He  ended  by  com- 
mitting suicide. 

When  the  indefatigable  Gumpellino  lost  his  place  as 
secretary  of  a  banker,  and  became  broker,  he  profited  by  the 
friendship  of  his  customers.  He  sold  drafts,  which  his 
former  principal  no  longer  would  take.  Many  of  these  were 
returned  under  protest,  and  he  acquired  the  reputation  of 
dealing  in  bills  on  which  his  clients  could  collect,  besides 
principal  and  interest,  the  customary  penalty  of  10  per  cent. 
When  his  clients  found  their  credit  to  suffer  in  consequence, 
Gumpellino  had  to  relinquish  his  specialty.  On  another 
Friday  we  encountered  Fritz  Teaserman  on  Broad  Street. 
He  had  sacrificed  the  bills  he  could  not  pay  for,  but  needed 
cash  to  resume  business  on  Monday.     We  bought  a  fine 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM       377 

portrait  of  Goethe,  an  heirloom,  which  he  had  received  from 
Europe,  and  which  continues  to  adorn  our  library.  The 
proceeds  did  not  help  long, — he  died  in  misery  soon  after. 
In  time  of  depression  many  bankers  accepted  notes  instead 
of  cash  for  their  bills;  they  charged  naturally  high  rates, 
and  terms  were  confidential. 

Business  has  now  grown  to  large  proportions,  and  is  done 
for  small  commissions,  almost  exclusively  for  cash.  Most  of 
it  has  fallen  into  the  hands  of  a  few  large  banks,  who  sell 
their  sight  bills  to  merchants  direct,  and  who  have  dispensed 
with  the  services  of  brokers.  These  banks  generally  employ 
expert  German  clerks  to  manage  this  business. 

The  largest  banks  dealing  in  foreign  exchange  are: 

The  National  City  Bank,  formerly  ruled  by  James  A. 
Stillman. 

The  Hanover  National  Bank,  formerly  by  James  T. 
Woodward. 

The  National  Park  Bank,  by  Richard  Delafield. 

The  Bank  of  Commerce  and  the  Bank  of  New  York  are 
also  dealers  in  foreign  bills.  The  Guaranty  Trust  Co.  has 
the  reputation  of  doing  more  foreign  business  than  all  others, 
while  The  American  Express  Co.  has  absorbed  the  lion's 
share  of  traveler's  credits.  Since  European  travel  has 
begun  to  grow,  the  amount  needed  for  such  credits  has 
become  enormous. 

Speculation  in  mining  stocks,  which  was  initiated  in  1861, 
included  many  worthlessclaims,such  as  the  "Mariposa  Co.," 
which  had  been  boosted  by  borrowing  the  name  of  General 
John  C.  Fremont.  Edward  Mott  Robinson,  father  of 
Hetty  Green,  sold  California  mining  stocks  at  23  Wall  Street. 
When  petroleum  wells  were  discovered  along  the  Allegheny 
River  and  West  Virginia,  a  number  of  speculators  rushed 
to  take  advantage.  Many  oil  fields  put  on  the  market 
were  sold  by  misrepresentation.     As  Western  gold   mines 


378  PROGRESS  OF  THE   EMPIRE   STATE 

had  been  salted,  oil  wells  were  greased  by  pouring  barrels  of 
crude  oil  into  the  crevices  of  the  rocks,  which  diggers  were 
invited  to  smell. 

A  petroleum  and  mining  stock  exchange  was  opened  1866, 
and  did  for  some  years  a  large  business,  most  of  which  proved 
disastrous.  A  persistent  stock  broker,  who  dealt  in  these 
claims,  was  John  Pondir.  He  learned  to  lie  while  he  was 
salesman  for  the  Christian  importing  firm  of  Messrs.  Christ 
&  Jay.  "Honest  John"  he  was  called  by  his  competitors, 
because  ultimately  he  believed  the  lies  he  told; — "handsome 
John"  because  his  son  was  uglier  than  he  was.  His  nose 
was  so  long  that  he  could  not  see  the  point  without  spectacles. 
This  man  allowed  no  acquaintance  to  pass  without  selling 
him  a  few  hundred  sharesof  "Germania  "or  other  "chromos." 
The  writer  became  one  of  his  victims,  and  has  kept  shy  of 
promoters  ever  since.  When  they  importune  him,  he  dam- 
pens their  ardor  with  the  quiet  remark  that  "he  is  satisfied 
with  the  means  he  has." 

The  crisis  of  1884  came  with  the  failure  of  the  Metro- 
politan Bank  on  May  14th  the  day  when  a  robbery  of 
#3,000,000  from  the  Second  National  Bank  by  its  speculat- 
ing president  was  discovered.  The  deficiency  was  made 
good  by  the  president's  father,  and  the  Clearing  House  came 
to  the  assistance  of  the  bank  and  of  George  I.  Seney, 
President  of  the  Metropolitan.  He  had  attempted  to  con- 
trol certain  railroads  of  doubtful  value  by  watering  their 
stocks.  The  Clearing  House  nursed  the  assets  of  the  bank 
and  of  Mr.  Seney,  until  the  debts  were  all  paid.  Seney  left 
when  he  died  a  collection  of  excellent  paintings. 

On  May  18th,  Grant  &  Ward,  together  with  the  Marine 
Bank,  failed.  The  financial  reputation  of  Ulysses  Grant 
was  never  great; — this  failure  ruined  it.  Fish,  President  of 
the  Marine  Bank,  was  hypnotized  by  Ward,  the  "Napoleon 
of  Finance, "  who  paid  unheard-of  interest  to  secure  deposits, 


THE  COMMERCIAL  PROGRESS  OF  GOTHAM       379 

and  finally  went  to  prison.  A  number  of  large  failures 
followed;  amongst  them  were:  Orlando  M.  Bogart,  Fisk  & 
Hatch,  Donnell  &  Lawson.  The  rate  of  interest  on  call 
loans,  which  recently  had  been  4  per  cent,  per  annum  rose 
to  4  per  cent,  a  day,  caused  by  the  return  from  Europe  of 
American  securities,  and  the  consequent  rise  of  foreign 
exchange. 

Baring  Bros.,  a  firm  of  London  bankers,  failed  in  1890, 
when  securities  of  the  Argentine  Republic  became  unsalable; 
they  were  the  oldest  and  best  known  firm  in  the  world,  but 
alone  they  could  not  sustain  the  credit  of  this  now  flourishing 
South  American  commonwealth.  The  passage  of  the  Sher- 
man Act,  compelling,  as  it  did,  our  Government  to  pay  for 
silver  more  than  its  value,  impaired  the  confidence  in  our 
securities.  These  two  incidents  were  sufficient  to  create  a 
panic,  which  would  have  been  more  disastrous  if  our 
Clearing  House  had  not  stepped  in  to  help.  No  better 
remedy  has  been  devised  forthe  faults  of  ourfinancial  system. 

Runs  on  banks  are  indicated  by  long  lines  of  anxious 
depositors,  some  of  whom  remain  all  night  to  be  on  the  spot 
when  the  bank  opens.  The  string  of  depositors  extends 
often  from  the  doors  into  the  street,  and  around  the  adjoin- 
ing squares.  Policemen  watch  so  that  no  depositor  gets 
an  unfair  advantage  over  another  depositor.  These  scenes 
continue  until  the  bank  fails,  or  until  the  depositors  are 
satisfied  that  it  is  safe  to  leave  their  money  where  it  is. 
This  transition  of  extreme  diffidence  to  perfect  confidence 
is  remarkable. 

The  collapse  of  the  Cordage  Swindle  led  to  the  crisis  of 
1893.  Securities  of  industrial  enterprises  were  discredited, 
and  money  was  hoarded.  In  Western  communities  amateur 
burglar  clubs  were  formed,  the  members  of  which  agreed  to 
scare  with  dark  lanterns  and  burglar  tools  all  neighbors 
who  had  hidden  money,  and  induce  them  to  return  it  to 


380  PROGRESS  OF  THE    EMPIRE   STATE 

banks  from  which  they  had  withdrawn  it.     Most  of  them 
were  glad  to  be  relieved  of  the  anxiety. 

The  events  of  1907,  the  suspension  of  the  Knickerbocker 
Trust  Co.,  the  embarrassment  of  other  banks,  are  fresh 
in  our  memories.  Histories  of  panics  repeat  themselves; 
the  circumstances  alone  differ.  During  1907,  we  drew  on 
Europe  for  more  gold  than  we  did  during  any  previous 
crisis,  but  we  have  since  exported  large  sums  to  relieve  a 
money  pressure  in  Berlin.  We  have  also  begun  to  negotiate 
foreign  loans  on  a  large  scale.  Deposits  in  our  Clearing 
House  banks  were  sixty-five  millions  in  1855;  they  approx- 
imate two  billions  now.  The  accumulation  of  money  in 
financial  centers  enables  New  York  to  lend,  where  formerly 
she  only  borrowed. 


&s£t^ 


L^>c 


ELIZABETH  JORDAN 

Editor,  author,  and  playwright;  literary  advi 

born  Milwaukee,  \\  laughter  William  Fi 

and   Margarita  (Garver)  Jordan;  graduated  Convent  of  Notre 
,   Milwaukee.      Member  editorial  staff  New   York  World, 
ng   assistant    editor    Sunday    World   three   years. 
Harper's    Bazar  January    i,    1900,  to   March,    1913. 
Author,  Tales  of  the  City  Room  (Scribners);  Tales  0}  the  Cloister 
(Harpers);  Tales  of  Destiny  (Harpers);  May  Iverson — Her  Book 
Many  Kingdo  rs);  May  Iverson  Tackles  Life 

(Harpers);   joint    author   of    The    Whole    Family   (Harpers),    in 
oration  with  William   Dean  Henry   James,   and 

others;  author  of  numerous  essays  and  short  stories  in  English 
m\  magazines.     Author  of  three-act  comedy,  The  Lady 
from   Oklahoma,  produced  in  New  York,  1 9 1 3 ;  and  one-act  play, 
The  Beauty  Parlor,  \  [913.     Vice-president  Notre  Dame 

Alumni  Association;  member  Big  Sisters  Organization,  Com- 
mittee of  One  Hundred,  New  York  Equal  Franchise  Society, 
New  York  Education  Committee,  Immigrants  Civic  League  of 
North  America. 


CHAPTER  X 

DEVELOPMENT  OF  THE   PERIODICAL   PRESS 

BY   ELIZABETH  JORDAN 

THE  history  of  modern  civilization,  with  all  its  short- 
comings,— with  all  its  crimes,  if  one  takes  so  dark 
a  view  of  the  world, — is  the  history  of  the  printing 
press;  and  certainly  the  history  of  American  newspaper  and 
magazine  literature  is,  in  a  very  intimate  and  real  sense,  the 
story  of  the  invention  which  Gutenberg  made  in  Mainz 
more  than  five  hundred  years  ago. 

There  is  a  great  deal  to  be  said  for  the  school  which 
educates  a  race  of  readers.  There  is  a  great  deal  to  be  said 
for  the  library  which  develops  a  taste  for  reading.  Those 
who  found  the  one  and  the  other  are,  undeniably,  apostles  of 
learning  and  of  literature.  The  lecturer,  the  man  who  works 
the  stereopticon  slide,  the  men  who  have  opened  up  the 
means  of  transportation  across  continents  and  across  oceans 
— all  these  have  stimulated  that  curiosity  in  regard  to  life 
which  is  the  reader's  appetite  and  thus  one  of  the  primary 
causes  of  the  amazing  development  of  the  press  in  the  last 
fifty  years.  To  all  of  these  belongs  in  some  degree  the  credit, 
if  credit  it  be,  of  arousing  that  which  only  the  frequent, 
vitally  alive  periodical  can  satisfy;  but  it  is  the  men  who  have 
perfected  the  printing  press  who  have  made  it  possible  that 
this  craving  could  be  satisfied  and  who,  paradoxically,  have 
thus  created  a  greater  passion.     In  nothing  is  it  more  true 

381 


382  PROGRESS  OF  THE   EMPIRE  STATE 

than  in  reading  that  the  appetite  "doth  grow  by  that  it 
feeds  upon." 

The  names  of  these  mechanicians  are  not  upon  the 
familiar  roll  of  fame  along  with  our  Hawthornes,  our  Lowells, 
our  Poes,  our  Emersons,  and  the  intellectual  descendants 
of  these  mighty  men.  But  it  is  they  who  have  established 
the  fame  of  these,  our  great,  in  all  parts  of  the  world.  The 
Clymers,  the  Stanhopes,  the  Smiths,  the  Treadwells,  the 
Nicholsons,  the  Napiers,  the  Koenigs,  the  Dutartres,  the 
Hoes,  the  Cottrells — there  is  a  long  line  of  them.  One  by 
one,  here,  in  Germany,  in  France,  and  in  England,  they  have 
all — probably  quite  careless  of  the  cause  of  letters,  probably 
quite  indifferent  to  the  hunger  of  the  human  heart  for  poetry 
or  the  thirst  of  the  human  mind  for  information  concerning 
its  neighbors — perfected  the  wonderful  thing  which  now 
deluges  us  with  information  and  with  misinformation. 

As  long  as  printing  and  all  the  following  processes  up 
to  distribution  were  expensive,  slow  processes,  so  long 
was  knowledge  bound  to  be  the  possession  of  the  few,  and  so 
long  were  magazines  and  even  newspapers  limited  both  in 
their  actual  or  physical  reach,  and  in  their  appeal,  to  the 
intellectual  or  the  pseudo-intellectual  classes.  But  with 
the  marvelous  mechanical  developments  of  the  last  fifty 
years,  and  particularly  of  the  last  fifteen  or  twenty  of  these 
years,  the  labor  of  production  and  of  distribution  has  been 
enormously  reduced  and  cheapened. 

The  machinery  for  turning  out  newspapers  at  a  rapid  rate 
was  improved,  one  may  almost  say  perfected,  long  before  it 
was  considered  desirable  to  combine  a  great  rate  of  speed 
with  the  fine  quality  of  craftsmanship  demanded  by  maga- 
zine work.  As  early  as  the  forties,  American  press  manu- 
facturers were  experimenting  with  the  possibilities  of  the 
single  small  cylinder  and  the  double  small  cylinder  machines 
which  one  Napier,  in  England,  had  patented.     The  single 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS      383 

cylinder  produced  2000  impressions  an  hour,  the  double 
4000,  and  the  world  held  its  breath  at  the  thought  of  such 
an  output.  By  1871  a  rotary  press  to  print  from  a  continu- 
ous roll  or  "web"  of  paper  was  under  consideration.  When 
this  was  perfected  18,000  perfect  papers  an  hour  were  pos- 
sible of  delivery  and  the  great  dailies,  as  we  know  them,  were 
practically  established.  Now  150,000  twelve-page  papers 
an  hour  are  turned  off  the  giant  machines! 

Another  factor  contributing  to  the  enormous  increase  of 
periodical  output  during  the  last  half  century  has  been  the 
discovery  of  a  process  for  producing  paper  from  wood  pulp. 
Up  to  1850  rags  were  used  for  the  manufacture  of  paper. 
About  that  time  the  supply  of  rags  began  to  fall  far  short  of 
the  demand  for  them.  A  period  of  experimenting  in  the  pos- 
sibilities of  straw  followed,  but  this  had  no  very  satisfactory 
results.  Then  came  the  discovery  of  the  wood  pulp  pro- 
cess and  forthwith  paper  was  a  cheap  product  and  the  for- 
ests of  the  country  promised  to  supply  it  indefinitely.  It 
can  be  produced  at  a  rate  of  about  three  cents  a  pound — 
something  amazingly  below  the  old  price  of  the  rag  product. 

After  the  newspapers  were,  so  to  speak,  on  their  feet,  the 
mechanical  processes  which  have  resulted  in  the  enormous 
output  of  magazines  in  the  past  twenty  or  twenty-five  years 
began  to  be  perfected.  Some  idea  of  what  this  output  is 
may  be  gained  from  the  statement  that  an  ordinary  library 
bulletin  contains  over  three  hundred  magazines  of  the  lit- 
erary sort  listed,  besides  page  after  page  of  special  periodi- 
cals. All  this  has  been  made  possible  by  the  perfection  of 
machinery.  Consider  what  it  means — a  machine  which  every 
hour  will  turn  out  4000  magazines  of  thirty-two  pages  each, 
with  a  cover  in  two  colors,  delivering  them  folded,  fastened 
together  with  two  wire  staples,  and  counted !  It  is  only 
about  twenty-one  years  ago  that  machinery  was  adapted  to 
do  not  only  swift  but  fine  work,  such  as  is  demanded  by  all 


384  PROGRESS  OF   THE   EMPIRE  STATE 

the  modern  magazines.  Theodore  De  Vinne  describes  this 
magazine  press  thus:  "At  the  end  of  a  long  row  of  machin- 
ery stands  the  web  press — a  massive  and  complicated  con- 
struction, especially  built  by  Hoe  &  Company,  for  printing, 
cutting,  and  folding  the  plain  and  advertising  pages  of  the 
Century.  Web  presses  for  newspapers  are  common  enough, 
but  this  press  has  the  distinction  of  being  the  first,  and  for 
three  years  the  only,  web  press  used  in  this  country  for  good 
book  work.  At  one  end  of  the  machine  is  a  great  roll  of 
paper,  more  than  two  miles  long  when  unwound  and  weigh- 
ing about  750  pounds.  As  the  paper  unwinds,  it  passes  first 
over  a  jet  of  steam  which  slightly  dampens  and  softens  its 
hard  surface  and  fits  it  for  receiving  impressions  without 
leaving  it  wet  or  sodden.  It  passes  under  a  plate  cylinder  on 
which  are  32  curved  plates,  inked  by  seven  large  rollers, 
which  print  32  pages  on  one  side.  Then  it  passes  around  a 
reversing  cylinder  which  presents  the  other  side  of  the  paper 
to  another  plate  cylinder  on  which  are  32  plates  which  print 
exactly  on  the  back  the  proper  pages  for  the  32  previously 
printed.  This  is  done  quickly — in  less  than  two  seconds — 
but  with  exactness.  But  the  web  of  paper  is  still  uncut.  To 
do  this,  it  is  drawn  upward  under  a  small  cylinder  contain- 
ing a  concealed  knife,  which  cuts  the  printed  web  in  strips, 
two  leaves  wide  and  four  leaves  long.  As  soon  as  cut,  the 
sheets  are  thrown  forward  on  endless  belts  of  tape.  An  in- 
genious but  undetectable  mechanism  gives  to  every  alter- 
nate sheet  a  quicker  movement,  so  that  it  falls  exactly  over 
its  predecessor,  making  two  lapped  strips  of  paper.  Busy 
little  adjusters  now  come  into  play,  placing  these  lapped 
sheets  of  paper  up  to  a  head  and  a  side  guide.  Without  an 
instant  of  delay,  down  comes  the  strong  piecing  blade  over 
the  center  of  the  sheet  and  pushes  it  out  of  sight;  pulleys 
at  once  seize  the  creased  sheet  and  press  it  flat,  in  which 
shape  it  is  hurried  forward  to  meet  three  circular  knives  on 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS       385 

one  shaft  which  cut  it  across  in  four  equal  pieces.  Disap- 
pearing for  an  instant  from  view,  it  comes  out  on  the  other 
side  of  the  upper  end  of  the  tail  of  the  press  in  the  form  of 
four  folded  sections  of  eight  pages  each.  Immediately  after, 
at  the  lower  end  of  the  tail  of  the  press,  out  come  four  en- 
tirely different  sections  of  eight  pages  each.  This  dupli- 
cate delivery  shows  the  product  of  the  press  to  be  at  every 
revolution  of  the  cylinder  64  pages,  neatly  printed,  truly  cut, 
and  accurately  registered  and  folded,  ready  for  the  binder. 
Two  boys  are  kept  fully  employed  in  seizing  the  folded  sec- 
tions and  putting  them  in  box  trucks  by  which  they  are  rolled 
out  to  the  elevator  and  on  these  sent  to  the  bindery.  This 
web  press  is  not  so  fast  as  the  web  press  of  daily  newspapers 
but  it  performs  more  operations  and  does  more  accurate 
work.  It  is  not  a  large  machine  nor  is  it  noisy,  nor  does  it 
seem  to  be  moving  fast;  but  the  paper  goes  through  the  cyl- 
inders at  the  rate  of  nearly  200  feet  a  minute;  it  does  ten 
times  as  much  work  as  the  noisier  and  more  bustling  presses 
by  its  side." 

As  if  this  miracle  were  not  enough,  the  manufacturers  of 
the  press  proceeded  to  busy  themselves  with  the  invention 
of  a  machine  on  the  rotary  principle  adapted  for  the  finest 
kind  of  illustrations— indeed  to  make  a  press  which  should 
do  as  fine  work  as  it  was  possible  to  do  on  the  hand  press  or 
the  stop  cylinder.  The  result  was  that  the  next  year  after 
the  web  press  just  described  was  set  up  in  the  De  Vinne 
printing  house,  a  machine  known  as  the  "rotary  art"  press 
was  introduced  there.  This  is  described  in  the  Century 
Magazine,  which  first  used  it,  as  follows:  "Sixty-four  plates 
of  the  Century,  truly  bent  to  the  proper  curv«,  are  firmly 
fastened  on  one  cylinder  60  inches  long,  and  about  30  inches 
in  diameter;  16  inking  rollers,  supplied  with  ink  from  two 
fountains,  successfully  ink  these  64  plates  with  a  delicacy 
and  yet  with  a  fullness  of  color  never  before  attained.     The 


386  PROGRESS  OF  THE   EMPIRE   STATE 

shafts  of  the  impression  cylinder  and  the  plate  cylinders, 
\]/2  inches  in  diameter,  do  not  give  or  spring  under  the 
strongest  impression.  Although  rigid  in  every  part,  in  the 
hands  of  an  expert  pressman  it  can  be  made  responsive  to 
the  slighest  overlay.  This  machine  is  fed  by  four  feeders 
from  single  sheets  in  the  usual  manner,  and  does  the  work 
of  four  stop  cylinders  in  superior  style.  The  gain  in  per- 
formance is  not  so  great  as  the  gain  in  quality  and  press- 
work,  but  quality  was  considered  more  than  speed.  The 
performance  of  the  machine  could  have  been  more  than 
doubled  by  adding  to  it  other  cylinders  which  would  print  on 
both  sides  of  the  paper;  but  careful  experiment  has  proved 
that  the  finest  woodcuts  cannot  be  properly  printed  with 
this  rapidity.  To  get  the  best  results  the  ink  on  one  side  of 
the  paper  must  be  dry  before  it  is  printed  on  the  other  side. " 
Here  then  we  have,  if  not  the  primary  cause  of  the  enor- 
mous increase  of  magazine  and  newspaper  literature  in  New 
York  State  and  throughout  the  country,  at  least  an  inter- 
acting cause.  At  the  great  Source  of  Things  it  seems  to  be 
arranged  that  the  intellectual  and  spiritual  needs  of  the 
human  race  shall  dumbly  make  their  appeal  to  the  race's 
mechanical  genius  and  then  that  the  mechanical  genius  shall 
in  turn  stimulate  that  which  has,  with  mute  insistence, 
brought  it  into  being.  Without  Gutenberg,  the  Renaissance 
might  have  been  a  vague  dream.  But  who  shall  deny  that 
the  great  subterranean  human  forces  which  were  to  produce  a 
revival  of  learning — the  wholes  modern  world — did  not  labor 
to  produce  Gutenberg  ?  And  so  it  has  with  the  great  modern 
manifestation  and  weapon  of  democracy,  the  force  which 
more  than  any  other  has  made  all  men  free  and  equal,  giving 
information  alike  to  all — the  material  on  which  to  build  judg- 
ments. The  modern  newspaper  and  magazine  press  is,  in 
a  very  real  sense,  the  child  of  modern  mechanical  genius; 
but  modern  mechanical  genius  exists  in   response  to   the 


r 


'tZ6<^ 


EDWARD  PAYSON  BRYAN 

Railway  official;  bom  Ashtabula  County,  Ohio,  July  2  1847- 
son  John  Love  and  Calista  (Griswold)  Bryan;  educated  in 
public  schools  and  preparatory  department  of  Denison  Univer- 
sity, Granville  Ohio.  Began  as  telegraph  operator  on  Louis- 
ville &  Nashville  Railroad,  at  Lebanon,  Kentucky,  ,865-  held 
various  positions  on  same  road  and  appointed  superintendent  at 
Louisville,  1890,  and  later  transferred  to  St.  Louis;  vice-president 
and  general  manager  Terminal  Railroa  ltion,  St.  Louis 

1900;  vice-president  and  general  manager,  1900-07,  of  the 
York  subway,  then  under  construction;  president,  1907- 
09,  of  the  Interborough  Rapid  Transit  Co.  (resigned  June  ,0 
1909);  v,ce-president  Great  Western  Power  Co.,  San  Francisco' 
since  January  1,  i9o9;  director  Metropolitan  Securities  Co.' 
(New  York),  New  York  City  Interborough  Railway  Co.;  trustee 
New  York  &  Long  Island  Railway.     Died  January  23   i9IO 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS      3*7 

untranslated,     dimly    understood    needs    of    the    race — is 
itself  the  child  of  insistent  spiritual  longings. 

And  what  has  the  progress  been  of  the  printed  word  in 
this  century?  The  records  show  us  that  in  1800  there  were, 
to  a  population  of  something  over  five  million,  two  hundred 
periodicals,  such  as  they  were.  As  far  as  the  magazine  part 
of  them  was  concerned,  they  were  mainly  reprints  from  the 
English  reviews.  By  1873  we  learn  that  there  were  eight 
thousand  periodical  publications  of  all  sorts  in  this  country. 
That  record  is  the  result  of  the  work  of  a  New  York  booksel- 
ler, Ernest  Steiger,  who,  with  great  diligence  and  a  patriotic 
interest  in  the  country  of  his  adoption,  labored  to  collect 
for  the  Vienna  Exposition  of  that  year  an  American  periodi- 
cal exhibit.  He  had  great  difficulties  in  his  undertaking,  and 
complained  rather  bitterly  of  the  indifference  of  publishers 
to  his  requests  for  samples  of  their  periodical  wares.  But 
in  spite  of  their  apathy  and  his  own  forebodings  concern- 
ing the  success  of  his  undertaking,  the  exhibition  must 
have  been  rather  an  imposing  one,  for  we  find  in  a  copy 
of  Ueber  Land  und  Meer  of  that  year  this  exclamation  of 
wonder  and  admiration:  "Eight  thousand  periodicals  are 
issued  between  the  Gulf  of  Mexico  and  the  great  Canadian 
Lakes!  One  periodical  to  every  five  thousand  persons, 
published  in  nearly  all  the  languages  of  the  civilized 
world!" 

To-day  to  our  population  of  something  over  ninety-five 
million  souls,  there  are  more  than  twenty  thousand  news- 
papers and  periodicals.  In  other  words  our  population  is 
seventeen  times  as  large  as  it  was  a  century  ago  and  our 
journalistic  provision  for  that  population  is  a  hundred  times 
greater.  Almost  all  of  this  increase  has  been  since  1850. 
Probably  no  cause  contributed  so  largely  to  the  growth  of 
the  newspaper — no  cause,  that  is,  outside  the  mechanical 
developments  in  printing — as  the  Civil  War.     The  Ameri- 


388  PROGRESS  OF  THE   EMPIRE   STATE 

can  people  had  to  have  newspapers  then  'and,  as  always 
happens  when  a  real  need  arises,  they  did  have  them. 

Of  course  there  were  periodical  publications  before  1850. 
The  North  American  Review,  now  in  New  York,  and  sole 
survivor  of  the  very  early  period,  was  started  in  Boston  in 
1815;  and  it  is  worthy  of  note  in  these  days  when  authors 
of  all  sorts — poets,  story-tellers,  essayists,  war  correspond- 
ents, social  philosophers,  and  even  "common  scolds" — 
fall  over  one  another,  figuratively  if  not  literally,  in  the 
waiting  rooms  of  all  the  magazines,  that  the  whole  of  the 
first  number  of  the  North  American  was,  except  for  one  long 
poem,  the  work  of  one  man,  William  Tudor.  This  magazine 
was,  however,  the  only  one  of  lusty  enough  life  to  survive 
the  chances  and  changes  of  the  early  period;  and  to-day,  in 
New  York,  under  the  brilliant  editorship  of  Colonel  George 
Harvey,  it  is  steadily  growing  in  power  and  greatness. 

Until  1833,  when  the  Knickerbocker  Magazine  made  a 
serious  and  noteworthy  attempt  in  the  direction  of  a  modern 
literary  magazine,  the  chief  periodical  food  of  the  country 
was  the  Annual  and  abortive  little  reprints  out  of  English 
magazines.  Between  1815  and  1833,  137  of  these  "literary" 
periodicals  came  into  being  and  passed  out  almost  unnoticed. 
About  fifty  of  them  were  religious,  six  were  organs  of  reform, 
and  six  were  devoted  to  science  and  art,  as  these  terms  were 
understood  in  that  period.  The  rest  were  full  of  clippings 
from  the  English  reviews  and  of  miscellaneous  literary  and 
family  journalism. 

The  Annuals  were  wonderful  things.  They  contained 
engravings  of  the  widow-and-the-weeping-willow  school  of 
sentiment,  poems  to  match,  highly  moral  stories,  many  of 
them  by  the  indefatigable  Mrs.  Sigourney,  fashion  notes 
and  domestic  advice,  mostly  in  very  fine  print,  excessively 
trying  to  the  eyes  and  perhaps  accountable  for  the  great 
prevalence  of  the  horn-bowed  spectacle. 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS       3^9 

Among  the  monthlies  preceding  Putnam's  Magazine, 
which  was  established  in  1853,  was  the  American  Monthly 
Magazine,  whose  leading  spirit  was  Henry  William  Herbert, 
better  known  as  Frank  Forester.  He  was  an  Englishman 
educated  at  Cambridge,  and  an  authority  on  all  sorts  of 
sports.  He  also  later  played  an  important  part  in  the  early 
life  of  Putnam's  Magazine. 

In  that  early  period — the  "false  dawn"  of  magazine 
literature — it  almost  seemed  as  if  no  periodical  was  well 
started  to  which  Poe  did  not  contribute  either  literarily  or 
editorially.  We  read  of  him  on  the  Southern  Literary  Mes- 
senger, published  in  Richmond  in  1830  by  E.  A.  White. 
Mr.  White  invited  Poe  to  help  in  the  editing  of  the  maga- 
zine, and  Poe  soon  had  entire  charge  of  it.  However,  his 
course  here,  as  in  all  other  places,  was  meteoric.  He 
resigned  and  became  merely  a  contributor.  In  1837  the 
Gentlemen  s  Magazine  was  founded  in  Philadelphia  by  the 
actor  comedian,  William  E.  Burton.  Again  Poe  was  its 
leading  contributor,  and  by  the  end  of  the  second  year  its 
editor.  And  again  the  inevitable  happened.  Mr.  Burton 
resumed  control  after  the  customary  harrowing  experience 
with  the  most  stormy,  electric  genius  that  has  ever  flashed 
across  our  literary  firmament.  Again  in  1841  we  find  Poe 
editor  of  and  contributor  to  Graham's  Magazine.  In  this 
we  find  much  of  his  very  best  work.  Here  he  was  succeeded 
as  editor  by  the  gentleman  who  was  responsible  for  the  most 
vindictive  biography  of  him,  Dr.  Rufus  W.  Griswold. 

But  it  was  not  till  1853,  when  Putnam's  Monthly  was 
established  in  New  York  by  George  Palmer  Putnam,  that  the 
American  monthly  magazine  can  be  said  really  to  have  found 
itself.  It  must  be  admitted,  when  one  looks  over  the  file  of 
the  magazine  during  the  first  year  or  two  of  its  life,  that  it 
entered  the  arena  very  fully  equipped — a  full-grown  Min- 
erva of  magazines.     Some  one,  reminiscing  concerning  those 


392  PROGRESS  OF  THE   EMPIRE   STATE 

enterprise.  Longfellow,  Lowell,  Thoreau,  and  Melville  were 
almost  the  only  contributors  to  the  new  enterprise  who 
could  be  called  authors  in  contradistinction  to  newspaper 
men,  and  the  newspaper  men  were  preponderantly,  almost 
exclusively,  recruited  from  the  staff  of  the  Tribune.  Quite 
rightly  and  inevitably  so,  since  the  Tribune,  then  in  its 
twelfth  year,  had  established  itself  as  the  organ  of  the 
humanities,  the  center  of  all  the  virtuosity  and  nearly  all 
the  intellect  of  the  place.  .  .  .  Mr.  Godwin  indeed  came 
from  the  Evening  Post.  Mr.  Maverick,  the  compiler  of  the 
scientific  notes,  was  already,  I  think,  a  useful  journeyman  on 
the  Times.  But  'G.  W.  C  and  'C.  A.  Dana'  were  of  the 
Tribune.  In  subsequent  numbers  appear  the  names  of 
Clarence  Cook,  then  the  art  critic  of  the  Tribune,  of  George 
Ripley,  its  literary  critic,  of  W.  H.  Fry,  its  musical  critic, 
of  Bayard  Taylor,  its  very  special  correspondent.  .  .  . 
Fitz-James  O'Brien  appears  in  the  first  number  as  the  critic 
of  'Our  Young  Authors,'  the  first  of  the  youngsters  treated 
being  Donald  G.  Mitchell,  and  the  second  Herman  Melville. 
This  brilliant  Irish  Bohemian,  who,  ten  years  later,  was  to 
give  his  life  for  his  adopted  country,  might  more  fairly  than 
any  other  contributor  be  called  a  magazinist  in  contradis- 
tinction to  a  journalist." 

In  1857  this  magazine  of  such  brilliant  promise,  the  fore- 
runner of  the  literary  magazines  which  have  followed  since 
in  such  numbers,  failed,  probably  as  a  result  of  the  panicky 
conditions  preceding  the  Civil  War.  In  1867  its  publication 
was  renewed  by  Mr.  Putnam,  but  in  1870  it  was  sold  to  the 
Charles  Scribner  Publishing  Company  and  became  part  of 
Scribners  Magazine,  of  which  Dr.  J.  G.  Holland  was  editor. 

It  was  almost  sixty  years  ago,  in  1857,  that  the  Atlantic 
Monthly  made  its  first  appearance.  Like  Putnam's  and  all 
the  early  magazines,  its  contributions  were  anonymous,  and 
only  by  their  later  reprinting  in  book  form  is  their  author- 


MARSHALL  SYLVANUS  DRIGGS 

Fire  insurance  underwriter;  born  in  New  York  City,  January 
i),  1834;  son  Edmund  and  Delia  A.  (Marshall)  Driggs;  educated 
ge  Payn  Quackenbos'  High  School  and  Reading  (Conn.) 
Institute;  married  in  Reading  Ridge,  Conn.,  December  2,  1857, 
Man.-  Elizabeth  Sanford;  Became  a  policy  clerk  of  the  Williams- 
burgh  City  Fire  Insurance  Co.  of  Brooklyn,  March  22,  1853; 
later  assistant  secretary;  director,  1868;  chairman  of  the  finance 
ittee,  1883;  president,  1892;  Director  First  National  Bank 
of  Brooklyn;  trustee  Williamsburgh  Trust  Co.,  Broadway  Trust 
Co.;  director  Casualty  Co.  of  America,  National  Foundry  Co. 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS       393 

ship  traceable.  That  most  delightful  of  all  its  contributors 
the  writer  with  whom  its  fame  is  indissolubly  linked,  Oliver 
Wendell  Holmes,  writing  at  a  much  later  period  about  the 
early  days  of  the  Atlantic,  said:  "In  the  meantime  the 
nebula  of  the  first  quarter  of  the  century  had  condensed  in- 
to the  constellation  of  the  middle  of  the  same  period.  When, 
a  little  while  after  the  establishment  of  this  magazine,  the 
1  Saturday  Club '  gathered  about  the  long  table  at '  Parker's, ' 
such  a  representation  of  all  that  was  best  in  American  litera- 
ture had  never  been  collected  within  so  small  a  compass. 
Most  of  the  Americans  whom  foreigners  cared  to  see — leav- 
ing out  of  consideration  official  dignitaries — were  seated  at 
the  board.  But  the  club  did  not  yet  exist,  and  the  magazine 
was  an  experiment.  There  had  already  been  several  monthly 
periodicals,  more  or  less  successful  and  permanent,  among 
which  Putnam's  Monthly  was  conspicuous,  owing  its  suc- 
cess very  largely  to  the  contributions  of  that  very  accom- 
plished and  delightful  writer,  Mr.  George  William  Curtis. 
That  magazine,  after  a  somewhat  prolonged  and  very  honor- 
able existence,  had  gone  where  all  periodicals  go  when  they 
die — into  the  archives  of  the  deaf,  dumb,  and  blind  recording 
angel  whose  name  is  Oblivion.  It  had  so  well  deserved  to  live 
that  its  death  was  a  surprise  and  a  source  of  regret.  Could 
another  monthly  take  its  place  and  keep  it  when  that,  with 
all  its  attractions  and  excellencies,  had  died  out  and  left  a 
blank  in  our  periodical  list?" — How  this  question  has  been 
answered  by  the  intervening  years! 

In  these  same  reminiscences  of  Dr.  Holmes  is  a  sketch  of 
one  of  the  figures  most  prominent  in  the  magazinedom  of 
that  early  time — as  frequent  and  beloved  a  contributor  as 
— shall  one  say  it? — the  Henry  van  Dykes  and  Margaret 
Delands  and  others  of  our  own  day,  without  whom  no  maga- 
zine is  quite  complete.  This  was  Nathaniel  Parker  Willis. 
Holmes,  recalling  him,   mentions  the  house   "from  which 


394  PROGRESS  OF  THE   EMPIRE   STATE 

emerged  one  of  the  liveliest  of  literary  butterflies.  The  father 
was  editor  of  the  Boston  Recorder,  a  very  respectable  but  very 
far  from  amusing  paper,  most  largely  patronized  by  that 
class  of  the  community  which  spoke  habitually  of  the 
first  day  of  the  week  as  'the  Sahbuth.'"  To  his  con- 
temporary young  Willis  appeared  "something  between  a 
remembrance  of  Count  d'Orsay  and  an  anticipation  of  Oscar 
Wilde.  There  used  to  be  in  the  gallery  of  the  Luxembourg 
a  picture  of  Hippolytus  and  Phaedra,  in  which  the  beauti- 
ful young  man  always  reminded  me  of  Willis,  in  spite  of  the 
shortcomings  of  the  living  face  as  compared  with  the  ideal. 
The  painted  youth  is  still  blooming  on  the  canvas,  but  the 
fresh-cheeked,  jaunty  young  author  has  long  faded  out  of 
human  sight.  I  took  the  flower  which  lies  before  me  at  this 
moment  as  I  write,  from  his  coffin  as  it  lay  just  outside  St. 
Paul's  Church  on  a  sad,  overclouded  winter's  day  in  the 
year  1867.  At  that  earlier  time  Willis  was  by  far  the  most 
prominent  young  American  author.  Cooper,  Irving,  Bryant, 
Halleck,  Drake,  had  all  done  their  best  work.  Longfellow 
was  not  yet  conspicuous,  Lowell  was  a  schoolboy.  Emerson 
was  unheard  of.  Whittier  was  beginning  to  make  his  way 
against  the  writers  with  better  educational  advantages  whom 
he  was  destined  to  outdo  and  to  outlive.  .  .  .  That  was 
the  day  of  souvenirs,  tokens,  forget-me-nots,  bijous,  and  all 
that  class  of  showy  annuals.  Short  stories,  slender  poems, 
steel  engravings  on  a  level  with  the  common  fashion  plates 
of  advertising  establishments,  gilt  edges,  resplendent  bind- 
ing— to  manifestations  of  this  sort  our  lighter  literature  had 
very  largely  run  for  some  years." 

From  this  tinselly  beginning,  which  the  most  charming 
of  essayists  thus  preserves  in  crystal  for  us,  to  Putnam's,  to 
Harper's  Magazine,  which,  established  in  1850,  soon  led  its 
associates  in  the  production  of  a  serious  literary  magazine, 
to  the  Century  which   sprang  in   1881   from  the  Scribner's 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS      395 

Magazine  which  Dr.  Holland  had  conducted  from  1870  until 
1 88 1,  to  the  new  Scribners  Monthly  begun  five  years  after 
the  merging  of  the  old  in  the  Century;  and  from  these 
to  that  great  influx  of  popular  periodical  literature  of  the 
last  decade  of  the  nineteenth  century, — here  is  wonderful 
progress  indeed. 

In  literature  itself — that  art  held  by  some  to  be  so  widely 
divergent  from  "writing  for  the  magazines"  or  "writing 
for  the  papers" — New  York  was  early  distinguished.  Out 
of  the  "annuals,"  the  "souvenirs,"  the  "lady's  treasure 
boxes,"  or  out  of  contemplation  of  life  or  browsings  in  libra- 
ries upon  the  products  of  the  English  writers — somewhere 
— was  born  among  the  men  of  those  remote  days  the  desire 
for  a  real  expression  in  letters  of  our  early  national  life. 
And  it  happened,  then  as  now,  that  when  New  York  did  not 
herself  bear  writers,  the  cities  and  towns  of  their  nativity 
did  contribute  them  later  in  life  to  the  metropolitan  city. 

In  almost  all  the  histories  of  American  letters,  the  father 
of  American  letters,  certainly  of  American  fiction,  is  held  to 
be  Charles  Brockden  Brown,  who,  chronologically,  at  least, 
seems  to  deserve  his  title.  He  was  a  Philadelphia  Quaker 
by  birth,  and  he  antedated  the  Revolution  by  five  years. 
Bred  to  the  law,  he  decided  early  in  life  that  his  heart  was 
in  literature,  and  he  undertook  to  support  himself  by  its 
practice.  As  has  befallen  so  often  since,  the  result  of  this 
decision  was  to  send  him  to  New  York  where  practically 
all  of  his  writing  days  were  passed,  and  where  he  died  of  con- 
sumption in  1 810.  In  spite  of  the  fact  that  his  maturity 
coincided  with  a  period  of  intense  national  feeling — between 
the  Revolution  and  the  War  of  1812 — his  novels  struck  no 
national  note,  unless,  indeed,  one  dignifies  by  this  descrip- 
tion the  tendency  to  speak  in  superlative  praise  of  all  things 
American  and  to  decry  all  things  foreign.  This  he  had  to 
an  extent  seldom  surpassed.     As  for  his  novels,  they  are  of 


396  PROGRESS  OF  THE   EMPIRE   STATE 

the  school  popular  in  England  at  the  time,  the  school  of  the 
mysterious,  the  dreadful.  Later,  in  Poe,  this  class  of  fiction 
touched,  with  us,  the  heights  of  genius.  There  is  some  gen- 
tle, sublimated  suggestion  of  it  in  much  of  Hawthorne's 
work.  But  as  Brockden  Brown  developed  it,  it  was  a  fair- 
ly frank  imitation  of  Mrs.  Radcliffe  with  The  Mysteries 
of  Udolpho  and  similar  tales.  Wieland,  Brown's  best 
remembered  novel,  is  distinctly  of  this  class. 

At  about  the  period  when  Brown's  career  was  closing, 
another  luminary,  to  whom,  in  a  much  more  real  sense,  the 
title  of  the  father  of  American  letters  belongs,  was  rising. 
In  1806,  Washington  Irving,  the  son  of  a  prosperous  New 
York  tradesman,  began  publishing  a  series  of  essays  called 
the  Salmagundi  Papers.  In  1809  he  published  his  Knicker- 
bocker History  of  New  York  in  which  the  learned  profess  to 
find  the  same  sort  of  playfulness  which  appears  to-day  in 
Mark  Twain,  in  Dooley — in  all  distinctively  American 
humor — that  almost  imperceptible  gliding  from  sense  to 
nonsense  and  back  again  which  has  become  one  of  our 
characteristics.  This  history,  like  several  other  permanent 
pieces  of  literature,  was  lightly  undertaken,  Irving  and  his 
brother  beginning  it  as  a  parody  upon  Dr.  Samuel  Latham 
Mitchill's  bombastic  History  of  New  York  published  in 
1807. 

Irving's  was  a  distinguished  career.  He  was  the  first 
American  writer  to  be  seriously  considered  in  England.  He 
was  employed  in  both  England  and  Spain  on  diplomatic  mis- 
sions— being  Secretary  of  the  American  Legation  in  London 
from  1829  until  1832  and  Minister  to  Spain  from  1842  until 
1846. 

The  other  great  name  in  American  letters  of  this  period 
belongs  to  New  York,  although  it  was  in  New  Jersey  that 
James  Fenimore  Cooper  was  born.  His  father  moved  in 
1789,  however,  when  he  was  about  a  year  old  to  that  part 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS      397 

of  New  York  known  now  as  Cooperstown.  Here  the  elder 
Cooper  maintained  a  sort  of  savage  feudal  estate  upon  a 
vast  property.  Until  he  was  fourteen  the  boy  lived  there, 
storing  up  the  impressions  which  made  him  the  first  of  the 
American  "nature"  writers.  For  it  is  in  his  feeling  for 
nature  and  in  his  fidelity  in  its  portrayal  that  his  permanent 
greatness,  perhaps,  lies.  Nowadays  we  do  not  believe  in  the 
verisimilitude  of  Cooper's  Indians,  but  we  cannot  doubt  the 
lifelikeness  of  his  backgrounds.  He  was  partly  educated  at 
Yale,  then  under  the  great  Timothy  Dwight,  and  leaving 
that  institution  of  learning  at  something  like  the  urgency 
of  the  faculty,  he  went  to  sea,  eventually  becoming  a  mid- 
shipman. In  181 1  he  married,  and  resigning  his  commission 
settled  in  Westchester.  He  began  his  literary  work  by  an 
anonymous  novel  Precaution,  a  tale  of  fashionable  Eng- 
lish life  written  chiefly  because  Cooper  thought  that  he  could 
write  a  better  story  than  a  certain  now-forgotten  English 
novel  of  the  day.  The  next  year,  in  1821,  he  came  into  his 
own  with  The  Spy,  a  tale  of  the  Revolution.  Then  came 
The  Pioneers,  The  Pilot,  The  Last  of  the  Mohicans,  and  the 
rest  of  the  long  list  of  his  works. 

Those  early  days  were  not  without  their  New  York  poets. 
Of  these,  before  William  Cullen  Bryant  appeared  to  domi- 
nate the  horizon  with  his  great,  impressive  figure,  the  chief 
were  James  K.  Paulding,  whose  name  might  have  gone  into 
complete  oblivion  had  he  not  collaborated  with  Irving  in  the 
production  of  the  Salmagundi  Papers;  Joseph  Rodman 
Drake,  who  wrote  "The  Culprit  Fay,"  and  Fitz-Greene 
Halleck.  The  two  latter  were  intimate  friends  during 
Drake's  brief  life — he  died  in  1820,  only  twenty-five  years 
old — and  the  only  poetical  work  of  Halleck  except  "Marco 
Bozzaris"  which  has  survived  neglect  is  a  poem  on  the  death 
of  his  friend,  the  first  stanza  of  which  is  the  really  touching, 
simple,  and  beautiful  one: 


398  PROGRESS  OF  THE   EMPIRE  STATE 

Green  be  the  turf  above  thee, 

Friend  of  my  better  days ! 
None  knew  thee  but  to  love  thee, 

Nor  named  thee  but  to  praise. 

The  two  young  men  had  collaborated  in  the  production 
of  the  "Croaker  Papers,"  the  appearance  of  which  in  the 
Evening  Post  of  that  period  used  to  be  awaited  breathlessly 
and  apprehensively,  like  the  celebrated  Junius  papers  in 
England.  These  poetical,  satirical  criticisms  of  events  and 
people,  locally  important,  created  a  stir  in  the  dignified 
New  York  of  the  time  which  the  most  voluble  of  modern 
scolds  and  reformers  might  rejoice  to  arouse. 

It  was  to  this  New  York  that  Bryant  came — a  country 
lawyer  from  Massachusetts,  son  of  a  country  doctor.  He 
was,  perhaps,  the  first  of  the  long  line  of  the  distinguished 
men  from  that  commonwealth  which  has  added  fame  to  the 
history  of  New  York  letters.  Certainly  he  was  far  the  great- 
est of  the  early  period.  He  was,  indubitably,  the  first  great 
American  poet.  Great  he  was  from  the  beginning  of  his 
career.  "Thanatopsis, "  written  when  he  was  seventeen,  is 
as  noble,  as  finished,  structurally  and  spiritually,  as  anything 
he  published  during  his  long  life. 

But  Bryant  was  not  only  a  poet.  He  was  a  journalist  as 
well,  and  perhaps  to  a  greater — certainly  to  a  more  admitted 
— extent  than  any  American  editor  who  has  succeeded  him, 
he  dignified  his  calling.  He  edited  the  Evening  Post  for 
half  a  century,  and  in  all  his  editorship  there  was  nothing  of 
which  the  high,  luminous  poet  in  him  could  have  been 
ashamed;  and,  more  remarkable  still,  nothing  which  needed 
the  leniency  of  the  counting-house  department  of  manage- 
ment. His  was,  in  every  sense,  a  great  and  vigorous  per- 
sonality. That  he  should  have  died  in  1878,  at  the  age  of 
eighty-six,  from  a  sunstroke  received  while  he  was  deliv- 
ering a  speech  at  the  unveiling  of  a  Central  Park  monument, 


HENRY  EVANS 

President  of  the  Continental  Insurance  Co.  and  thi 
Phenix  Insurance  Co.  of  New  York;  was  horn  in  Houston,  Texas, 
\pril  14,  i860.     Some  time  after  1  of  the  war,  went  to 

New  York,  where  he  was  educated,  leaving  Columbia  <  0 
School  of  Mines  to  enter  the  service  of  the  Continental  in  March, 
1878   as  a  junior  clerk.     Becaj  .try  of  the  agency  depart- 

ment May  10,  1888;  was  econd  vice-president,  retaining 

the  agency  department  secretaryship  in  1889;  vice-president 
January  14,  189-',  and  president  January  15,  i9<>3-  In  March, 
1904  assumed  the  chairmanship  of  the  Committee  of  Twenty  on 
congested  districts  of  cities  of  the  National  Board  of  Fire  Under- 
writers In  June,  1906,  formed  the  Fidelity  Fire  Insurance 
Company,  of  which  he  is  president  and  a  director.  In  Decei 
1909  he  was  requested  by  the  directors  to  take  control  of  the 
Phenix  Insurance  Company  of  Brooklyn,  which  company  v 
trouble  because  of  irregularities  in  its  administration,  and  he  suc- 
ceeded in  saving  the  Phenix's  agency  plant.  On  March  i,  1910, 
the  company  was  merged  with  the  Fidelity  Fire  Insurance  Co., 
under  the  title  of  the  Fidelity-Phenix  Fire  Insurance  Co.,  and 
Mr.  Evans  was  elected  president  of  the  merged  company. 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS       399 

speaks  volumes  for  the  mental  and  physical  quality  of  the 
man  who  lived  and  wrought  so  long  and  so  splendidly  in 
New  York.   Truly  in  those  days  there  were  giants  in  the  land. 

Until  about  1890,  the  well-established  magazines  contin- 
ued in  kind  very  much  what  the  old  Harper  s  and  Putnam's 
had  promised.  Names  which  will  be  preserved  in  the  his- 
tory of  letters  are  found  on  their  pages  of  contents.  Bril- 
liant, scholarly,  oftentimes  timely,  the  fine  print  of  their 
yellowed  pages  holds  much  that  is  choicest  in  our  literature. 
But  they  were  magazines  more  or  less  for  the  elect,  the  lite- 
rati, the  illuminati;  they  did  not  deal  largely  in  that  form 
of  timeliness  which  is  so  familiar  to  us  to-day.  Exposure, 
warning,  that  had  been  rather  the  province  of  the  daily 
newspaper  and  of  the  weekly.  It  was  Harper  s  Weekly  and 
not  the  Monthly  which,  through  Nast's  cartoons,  destroyed 
the  power  of  the  Tweed  Ring,  and  sent  the  chieftain  into 
exile.  It  was  Harper  s  Weekly  and  those  same  cartoons,  by 
the  way,  which  discovered  him  in  his  retreat,  and  haled 
him  home  to  his  punishment.  It  was  Harper  s  Weekly  and 
not  the  Monthly  which  played  an  important  part  in  the 
events  preceding  the  Civil  War.  Harper  s  Weekly  was  a 
brilliant  and  a  stirring  force.  The  monthlies  dwelt  in  a 
higher,  rarer,  more  tranquil  air — or  so  it  was  supposed. 

But  the  nineties  saw  a  wonderful  change  in  the  magazine 
world.  Periodicals  were  issued  to  please  the  eye — not  pri- 
marily because  the  publishers  had  discovered  a  fondness 
for  pretty  pictures  among  a  large  rural  constituency,  but 
primarily  because  some  one  had  invented  a  cheap  process 
for  reproducing  pictures  which  took  the  place  of  the  expen- 
sive and  laborious  wood  and  steel  cuts  used  up  to  that  time. 
Munsey's  Magazine  led  the  army  of  the  popular  pictorial 
periodicals.  Its  followers,  its  improvers,  have  been  legion. 
There  can  be  no  doubt  that,  as  in  the  ancient  brotherhood 
of  dignity  and  worth,  Harper's,  the  Century,  and  the  rest, 


400  PROGRESS  OF  THE   EMPIRE  STATE 

the  claims  of  the  intellectual  man  were  considered,  so  the  new 
magazines  gave  careful  and  highly  profitable  attention  to  the 
needs  and  the  desires  of  the  man  who  made  no  pretense  of 
unusual  intellect.  Pictures,  light  literature,  amusing  verse, 
articles  of  the  most  ephemeral  value,  gossip — these  were  the 
mental  food  products  at  first  offered  by  the  newer  magazines. 
The  literary  limitations  as  well  as  the  financial  limitations  of 
the  great  "common"  people  were  very  well  understood  or 
very  sympathetically  divined  by  the  publishers  of  these  peri- 
odicals. And  what  has  the  result  been?  It  has  been  twofold. 
Those  trifling,  half-picture  magazines,  have  been,  as  it  were, 
the  primer  on  which  a  non-reading  public  learned  to  read; 
having  learned  to  read,  that  public  demands  a  somewhat 
more  solid  volume  for  its  delectation.  Those  magazines 
have  had  to  improve  their  own  quality  and  tone  to  meet  the 
demands  which  they  themselves  have  created.  And  mean- 
time the  older  brethren  of  the  magazine  world  have  had  to 
come  down  somewhat  from  the  mountain  heights  on  which 
they  dwelt,  and  have  been  obliged  to  consider  the  needs  of 
that  ubiquitous  person,  the  man  in  the  street.  Gradually 
the  older  magazines  have  been  popularized,  without,  it  may 
be  confidently  asserted,  injury  to  their  standards  or  their 
style,  while  the  popular  magazines  have  been  strengthened, 
solidified,  dignified,  to  meet  the  demands  of  the  public  that 
they  themselves  have  created. 

Charles  Dana,  who  knew  a  great  deal  about  it,  once  said 
that  there  were  two  kinds  of  newspapers,  "those  made  for 
sensible  persons  and  those  made  for  fools. "  "  It  is  perfectly 
right,"  he  declared,  "to  provide  for  the  fools  in  special  news- 
papers; and  that  duty  is  extensively  and  conscientiously 
performed  by  gifted  and  conspicuous  individuals,  and  I  have 
heard  that  some  of  them  make  money  by  it."  The  caustic 
saying  is  no  less  true  of  magazines  than  of  newspapers. 

One  of  the  most  interesting  literary  results  of  the  enor- 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS      401 

mous  growth  of  the  popular  magazine,  with  its  immediate 
response  to  the  need  of  the  moment  and  its  entire  indifference 
to  the  longer  need,  has  been  the  development  of  the  Ameri- 
can short  story.  We  are  still  the  leaders  in  this  form  of 
literature  among  English-speaking  people.  The  perfect  style 
and  grace  attained  by  those  masters  of  the  short  story  art, 
the  French,  is  certainly  not  yet  ours,  but  we  have  outdis- 
tanced our  English  brethren  to  a  marked  degree.  Though 
they  still  seem  to  be  the  masters  of  the  essay  form — that 
form  which  demands  the  atmosphere  of  leisure,  the  back- 
ground of  long  scholarship — yet  to  us  the  short  story  palm 
must  be  awarded.  There  seems  to  be  something  peculiarly 
congenial  to  the  American  temperament,  with  its  nervous- 
ness, its  sense  of  dramatic  values,  its  humor,  its  restlessness, 
in  the  short  story.  The  honor  roll  of  our  short  story  writers 
is  a  long  and  resplendent  one.  Not  even  to  the  French 
can  Mary  Wilkins  yield  the  palm  for  fine,  delicate,  marvel- 
ously  terse  delineation  of  character  and  of  situation.  Alice 
Brown  is  another  of  the  most  charming  of  the  short  story 
tellers.  Mrs.  Wharton's  genius  still  seems  to  many  of  us 
to  have  found  its  happiest  expression  in  her  briefer  studies 
of  character  in  a  single  episode  or  a  single  setting. 

Next  to  its  influence  upon  the  development  of  the  art  of 
short  story  writing,  the  New  York  magazine  of  these  later 
days  has  had  an  important  effect  upon  art  in  the  pictorial 
sense.  The  cynics  may  sneer  and  declare  that  but  for  the 
new  monthlies,  with  their  insistence  upon  catching  the  eye 
of  the  thoughtless  with  a  picture,  many  excellent  and  worthy 
young  men  and  women,  who  should  be  following  the  plow 
or  hemming  muslins,  would  be  pursuing  their  proper  call- 
ing; and  it  is  true  that  much  that  passes  as  illustration  is  not 
even  second  cousin  to  art.  Nevertheless,  the  field  of  illus- 
tration has  offered  a  development  to  a  school  of  real  artists 

which  would  otherwise  almost  inevitably  have  failed  of  the 
26 


402  PROGRESS  OF  THE    EMPIRE   STATE 

true  means  of  expression.  At  the  present  time  particular 
interest  attaches  to  this  view  of  the  case.  The  American 
academicians  are  accused  of  all  sorts  of  sins,  of  stiffness,  un- 
originality,  "  prettiness, "  and  hide-bound  tradition.  Critics 
— the  genuine  critics  of  art,  not  the  mere  carpers  at  exist- 
ing situations — find  the  promise  of  the  future — where? 
Almost  without  exception  among  the  men  who  had  their 
training  and  made  their  early  reputations  as  illustrators  in 
the  newspapers  and  the  magazines.  These  are  the  men  who 
in  one  way  and  another  have  seen  life  raw,  and  have  striven 
to  reproduce  it  as  they  have  seen  it.  Their  genius,  their 
talent,  is  their  individual  gift  from  heaven;  their  technique, 
their  sense  of  values  of  light  and  shade  may  be  partly  the 
gift  of  their  schools  and  their  masters;  but  their  ability  to 
paint  life,  to  get  away  from  some  time-honored  convention 
of  beauty,  has  been  the  gift  of  the  periodicals  on  which  they 
have  worked — the  "timely"  writings  which  they  have  had 
to  illustrate,  the  journeys  they  have  had  to  take,  not  whither 
their  artistic  impulses  led  them  but  whither  dramatic  hap- 
penings summoned.  The  militant  "eight"  of  whom  we  of 
New  York  hear  much — George  Luks,  Robert  Henri,  and 
the  rest — the  latest  rebels  against  the  dictates  of  the  Academy 
and,  according  to  not  negligible  authority,  the  latest  hopes 
for  the  future  of  art  in  America — are  almost  without 
exception  men  who  have  done  much  illustrating. 

The  newer  school  of  magazine  literature  has  developed 
something  besides  the  short  story.  It  has  developed  what 
may  be  called  the  campaign  literature  of  civic  decency.  To 
do  this  it  has,  of  course,  encroached  more  or  less  upon 
the  field  of  the  daily  newspaper,  but  it  has  accomplished 
its  results  in  a  way  which  the  newspaper  failed  in  doing. 
Exactly  why  it  should  be  true  that  the  scream  which  passes 
unnoticed  in  the  morning  paper  becomes  a  loud,  insistent, 
thought-compelling  cry  in  the  monthly  magazine,  it  is  diffi- 


GUSTAV  LINDENTHAL 

1  engineer;  born  Brunn,  Austria,  May  21,  [850.     Pursued 
scientific  studies  at  colleges  in   Brunn  and  Vienna,   [864 
employed  on  surveys  and  construction  of  railroads  and  bridges 
in  Austria  and  Switzerland  till   1874,  when  he  came  to  United 
States;  engineer  Center.-  I         national   Exhibition,  Philadel- 

phia, 1S74  reafter  consulting  engineer  in  construction  of 

rn   railroads,   with   main  offio  gh;   removed  to 

New  York  City,  1892;  Bridges,  City  of   New 

"»"-  03;  con  imsburg  bridge, 

and  made  plans  for  the  Bl  |  and  Manhattan  bridges; 

was  memb  which  planned 

the  tunnel  ania  Railroad  under  the 

and    East    Rivers  and    in  New    York  City;   engineer  and 
architect  Hell  Gate  bridj  st  River  for  New  York  Con- 

necting  Railroad,  which,  when  completed,  will  be  the  longest 
arch  bridge  in  the  world;  president  North  River  Bridge  Co.;  mem- 
ber British  Institute  of  Civil  Engineers,  American  Society  Civil 
Engineers,  Canadian  Society  Civil  Engineers,  Verein  Deutseher 
Maschinen  Ingenieure  in  Berlin,  and  other  similar  organizations. 


01  \  I  I  ol'. MI  NT  OF  THE  PERIODICAL  PRESS      403 

cult  to  determine.  Perhaps,  in  spite  of  ourselves,  we  cannot 
fail  to  attend  more  to  that  for  which  we  have  paid  ten,  fifteen, 
twenty-five  or  thirty-five  cents  than  to  that  for  which  we 
have  paid  but  a  penny  or  two.  Or  perhaps  it  is  that  the 
magazines  have  so  far  been  kept  freer  from  the  suspicion 
of  political  bias  than  the  newspapers.  Most  of  us  know,  or 
believe  that  we  know,  that  the  newspapers  are  the  organs  of 
a  rich  man's  ambitions,  a  corporation's  desires,  a  political 
party's  needs.  With  one  or  two  signal  exceptions  we  do  not 
believe  this  in  regard  to  the  monthly  magazines.  Conse- 
quently we  attend  to  their  warnings  with  a  soberer  interest. 

That  this  literature  of  outcry,  of  denunciation,  this  uni- 
versal muck-raking,  has  been  tiresomely  overdone,  there 
is  no  possibility  of  denying.  But  that  in  its  saner  forms  it 
has  been  productive  of  immense  good  is  equally  impossible 
of  controversion.  We  have  been  stirred  out  of  our  sluggish 
self-content.  Willy-nilly,  we  have  been  obliged  to  recog- 
nize that  our  political  system  is  susceptible  of  grave  abuses, 
that  our  social  system  is  not  impregnable  to  corruption,  and 
that  only  by  the  active  interest  and  labor  of  ourselves — 
ourselves,  "the  better  element" — can  all  manner  of  hideous 
civic  disease  be  cured  and  prevented.  If  it  had  done  no 
other  thing  than  this,  the  popular  magazine  would  deserve 
a  place  in  the  literary  hall  of  fame. 

How  our  magazines  strike  a  foreign  contemporary  is  of 
interest  and  even  of  importance  to  us.  "There  can  be  little 
doubt,  we  think,  that  American  illustrated  magazines  are 
decidedly  better,  and,  having  regard  to  the  quality  of  their 
engravings  and  the  quantity  of  their  letter  press,  much 
cheaper  than  their  English  competitors.  Which  of  our  maga- 
zines, for  example,  can  compare  with  Harper  s?  The  cause 
of  this  superiority  is  an  interesting  question. " 

"Praise  from  Sir  Hubert  is  commendation  indeed." 
When  an  English  literary  and  critical  review,  not  famous  for 


404  PROGRESS  OF  THE   EMPIRE   STATE 

too  urbane  a  spirit,  goes  out  of  its  way  to  pay  compliments 
like  this  to  our  periodical  press,  we  can  indeed  plume  our- 
selves on  having  accomplished  something  remarkable.  The 
Spectator,  in  which  this  appreciation  appears,  is  somewhat 
overcritical  in  its  outlook  upon  all  the  world,  and  perhaps 
particularly  so  in  its  attitude  toward  things  American.  Yet 
see  how  long  a  way  we  have  come  since  the  days  when 
Sydney  Smith  stabbed  our  national  vanity  with  a  sneer, 
demanding  to  know  "who  ever  read  an  American  book." 

The  Spectator  attributes  part  of  this  superiority  which 
it  so  gracefully  concedes  to  the  American  magazine  to  our 
postal  regulations,  which,  it  seems,  are  more  favorable  to 
publishers  than  those  in  England.  But  even  having  done 
this,  it  goes  on  handsomely:  "It  would,  however,  be  equally 
wrong  to  assume  that  the  postal  advantages  enjoyed  by 
the  American  magazines  are  the  sole,  or  indeed  the  main, 
cause  of  their  superiority  to  our  own.  It  lies  in  the  fact 
that  magazine  readers,  and  readers  generally,  are  not  only 
absolutely  but  relatively  far  more  numerous  in  the  States 
than  they  are  here,  and  that  the  average  American  reader 
both  buys  more  books  and  pays  a  higher  price  for  them  than 
the  average  English  reader.  .  .  .  Among  other  reasons 
for  the  prosperity  of  American  magazines  and  periodicals 
generally  are  the  marvelous  enterprise  and  energy  of  their 
conductors.  A  New  York  weekly  paper  has  been  known 
to  spend  £5000  in  advertising  a  short  romance  of  small 
merit  by  an  author  of  no  great  repute.  The  larger  maga- 
zines, besides  paying  liberally  for  ordinary  contributions 
and  spending  largely  on  their  illustrations,  never  consider 
expense  when  it  is  a  question  of  obtaining  something  strik- 
ing or  new.  ...  If  it  were  physically  possible,  they 
would  be  quite  capable  of  sending  expeditions  to  survey 
Saturn  and  illustrate  the  mountains  of  the  moon." 

The  city  which  has  benefited   most — if  benefit  it  shall 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS       405 

be  called — by  this  amazing  and  prodigious  increase  in  the 
output  of  the  presses,  is  New  York.  One  of  the  most  inter- 
esting features  of  the  great  public  library  lists  of  periodicals 
is  the  place  of  their  publication.  Looking  over  page  after 
page  of  them  one  is  struck  by  the  continual  recurrence  of 
the  word  "New  York. "  London,  Paris,  and  this  city  are  the 
great  periodical  publishing  centers  of  the  world.  In  the 
United  States  the  magazine  activity  is  confined  so  closely 
to  the  East  that  the  Western  publications  are  almost  a  negli- 
gible quantity.  One  finds,  of  course,  the  Overland  or 
the  New  Californian  of  the  Pacific  Coast.  Not  long  ago 
one  found  the  Lakeside  Monthly  of  Chicago.  And  there 
are,  to  be  sure,  scattering  periodicals  bringing  up  the  tail 
of  the  great  lists  like  the  scattering  votes  for  practically  un- 
known candidates  in  the  great  elections.  There  is  an  occa- 
sional Des  Moines,  an  occasional  Minneapolis,  an  occasional 
Denver  imprint,  but  for  the  most  part  the  production  of 
periodical  literature  is  confined  to  the  section  east  of  the 
Alleghenies,  and  particularly  to  New  York  City. 

Of  course  this  was  not  always  so.  Boston's  early 
supremacy  in  the  magazine  field  is  something  which  Boston 
does  not  allow  the  rest  of  the  country  to  forget,  even  if  it 
were  inclined  to  do  so.  But  the  last  twenty-five  years  have 
seen  a  great  change  in  the  respective  positions  of  Boston 
and  New  York  in  this  regard.  The  Atlantic  Monthly  still 
remains  to  the  city  of  the  gilded  dome  a  reminder  of 
past  glories,  and  a  monument  of  present  importance.  But 
except  for  the  Atlantic,  the  periodicals  published  in  Boston 
are  practically  negligible. 

In  this  city  it  is  a  dull  week,  one  may  almost  say,  which 
does  not  see  a  periodical  begun  or  a  periodical  ended.  But 
during  the  past  ten  or  fifteen  years,  in  spite  of  the  death  of 
many  abortive  publications,  there  has  been  a  steady  increase 
in  the  list  of  New  York  magazines.     Of  the  so-called  "lit- 


406  PROGRESS  OF  THE   EMPIRE  STATE 

erary"  sort  alone — the  kind  dealing  with  life,  art,  and  letters 
in  general,  not  the  organs  of  a  specific  profession  or  trade — 
there  are  about  180  published  in  New  York. 

The  circulation  of  these  magazines  is  no  less  remarkable 
than  their  number.  For  a  "popular"  periodical  to  claim  a 
circulation  of  a  million  copies  is  not  unknown.  The  five  hun- 
dred thousand  circulation  list  is  a  mere  commonplace  of 
magazinedom.  Everybody  s,  at  the  time  when  Lawson's 
"Frenzied  Finance"  articles  were  appearing,  is  said  to  have 
reached  the  million  point  in  circulation.  Munsey  claims  to 
have  touched  the  750,000  limit.  McClure's  is  another  of  the 
great  popular  successes. 

These  claims  of  an  immense  circulation  are  even  com- 
moner in  the  New  York  dailies  and  the  Sunday  newspapers 
than  in  the  weeklies  and  monthlies.  A  circulation  of  a  mil- 
lion is  something  which  almost  any  of  the  metropolitan  news- 
papers will  claim  without  a  quiver.  The  figures  quoted  on 
the  Sunday  papers  are  simply  staggering  in  their  immensity. 
Rival  publishers  prepare  statements  showing  how  the  deal- 
ers who  advertise  in  their  respective  journals  will  have  an 
audience  of  anywhere  from  a  million  to  twice  that  number, 
as  against  half  as  many  allowed  to  the  combination  of  all 
their  competitors. 

That  these  claims  are  often  absurdly  extravagant  there 
is  no  possible  denying.  But,  on  the  other  hand,  that  the 
circulation  is  something  which  would  have  been  unbelievable 
thirty  years  ago,  and  which  is  almost  unimaginable  to  the 
human  mind  now,  is  also  certain.  The  Sunday  newspapers 
travel  to  every  remote  hamlet.  The  evening  newspapers 
appear  in  successive  editions  from  nine  o'clock  in  the  morn- 
ing until  the  same  hour  or  later  at  night.  So  addicted  to 
the  newspaper  habit  is  the  average  American  that  he  buys 
half  a  dozen  of  these  editions  in  a  day,  especially  when  any 
event  of  national  importance  is  enacting.     During  the  Span- 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS       407 

ish  War  those  evening  "extras"  were  bought  literally  by 
the  score  by  almost  every  individual  in  New  York;  and 
although  matters  of  such  universal  interest  as  war  are  rare, 
nevertheless  the  publishers  of  the  daily  newspapers  are 
masters  of  the  art  of  stimulating  public  curiosity  in  regard 
to  whatever  is  going  on  in  the  world,  and  of  the  allied  art  of 
deluding  newspaper  buyers  into  the  belief  that  something 
vitally  important  is  happening  every  hour. 

Of  course  these  claims  to  enormous  circulation,  on  the 
part  of  both  newspapers  and  magazines  are  bait  for  the 
advertisers.  It  is  in  the  advertising  that  the  prosperity  of 
the  publications  lies.  From  this  fact  springs  the  charge  that 
it  is  the  countinghouse  which  rules  the  policy  of  both  the 
great  dailies  and  the  great  monthlies.  The  truth  of  this 
charge,  as  far  as  the  dailies  are  concerned,  there  may  be  no 
refuting,  but  the  history  of  the  metropolitan  newspapers 
does  not  show  that  the  days  when  the  editorial  and  not  the 
business  office  dictated  a  journal's  policy  were  so  much  wiser 
than  our  own.  Greeley,  Godkin,  Dana — great  men  and 
great  editors  though  they  were — were  also  violently  preju- 
diced human  beings  in  many  regards.  Greeley  utterly  failed 
to  interpret  the  sentiment  of  the  country,  in  the  days  pre- 
ceding the  Civil  War,  in  regard  to  the  John  Brown  affair. 
All  of  them  made  many  mistakes  in  policy,  perhaps  not 
such  sordid  ones  as  those  of  the  countinghouse,  but  no  less 
wrong-headed.  The  result,  on  the  whole,  of  the  new  place 
of  dictating  policies  has  not  been  detrimental  to  the  public 
interests;  newspapers  have  tended  to  become  rather  more 
the  mediums  for  communicating  actual  news,  and  less  the 
teachers  of  the  public.  Consequently  every  man  is  more 
his  own  editor  than  in  the  old  days. 

That  the  enormous  circulation  claimed  by  the  great 
New  York  popular  magazines  has  been  in  no  degree  detri- 
mental to  the  older  established  ones  is  one  of  the  evidences 


408  PROGRESS  OF  THE   EMPJRE   STATE 

that  in  this  country  there  is  room  for  all  sorts  and  conditions 
of  literature.  The  more  expensive  periodicals  have  been 
enabled  to  maintain  their  advertising  by  a  claim  which 
appeals  as  strongly  to  the  intelligence  of  the  advertisers  as 
does  the  claim  of  enormous  circulation, — namely,  that  of 
an  exclusive  and  highly  cultivated  circulation.  To  appeal 
to  a  vast  mob  is,  of  course,  gratifying  to  any  merchant 
with  products  to  sell;  to  appeal  to  a  thoughtful  and  pre- 
sumably a  prosperous  clientele,  is  equally  to  be  desired.  It 
is  this  fact  which  has  enabled  the  expensive  magazines 
to  maintain  their  own  in  competition  with  the  cheaper 
ones. 

In  a  sense,  the  history  of  New  York  newspaper  develop- 
mentduring  the  past  half  century  has  paralleled  that  of  maga- 
zine development.  Here  again  the  wonderful  inventions  and 
improvements  in  machinery,  the  discovery  of  the  method 
of  transmuting  a  forest  tree  into  a  Sunday  supplement  or 
an  evening  extra,  have  played  an  incalculable  part  in  increas- 
ing the  newspaper  output.  An  observer  who  had  a  unique 
life  in  which  to  mark  the  changes  in  our  current  litera- 
ture and  whose  interests  led  him  to  study  them,  the  late 
Richard  Watson  Gilder,  once  had  some  pregnant  and 
valuable  things  to  say  on  this  subject  in  an  interview. 

"I  suppose,"  he  is  quoted  as  saying,  "in  no  country  are 
newspapers  so  much  an  integral  part  of  the  people's  life  and 
thought  as  here  in  America.  We  are,  as  Mr.  Bryce  says, 
the  great  reading  people  of  the  world.  You  see  the  contrast 
if  you  go  to  Southern  Europe,  for  instance.  There  illiteracy 
is  common  and  the  people  depend  to  a  great  extent  on  talk 
and  local  gossip  for  their  daily  enlightenment.  I  think  that 
we  have  a  greater  eagerness  than  they  to  know  what  is 
going  on  in  the  world.  .  .  .  The  enormous  appetite  the 
public  has  for  periodical  literature  seems  astonishing,  but 
it  is  perfectly  natural.     One  of  the  strongest  traits  in  the 


GEORGE  PRESTON   SHELDON 

Insurance  officer;  born  in  New  York  City,  January  17,  1847; 
graduated  from  Yale  in  1867,  with  degree  of  A.B.  Became 
president  Phenix  Insurance  Co.,  1888.  Member  Chamber  of 
Commerce,  Metropolitan  Museum  of  Art,  Yale  Alumni,  Athletic, 
University,  and  New  York  Clubs.     Died  December  25,  1909. 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS      409 

human  mind  is  curiosity.  The  newspaper  habit  is  the  re- 
sult of  our  attitude  of  inquiry  toward  all  mankind.  Curi- 
osity accounts  in  a  great  measure  for  our  love  of  literature, 
for  our  love  of  news,  for  our  love  of  life.  .  .  .  The  aspect 
in  which  the  daily  press  has  changed  most  within  my  recol- 
lection is  in  its  development  of  sensationalism.  This  sen- 
sational wave  which  started  in  the  West  has  now  swept 
across  the  country  from  ocean  to  ocean.  But  the  new 
journalism  is  not  without  its  good  points.  Along  with 
all  the  sensationalism,  the  lack  of  responsibility,  the 
getting  together  of 'fake' news,  and  the  contriving  of  evi- 
dent pictorial  falsehoods,  a  great  deal  of  talent  goes  into 
the  make-up  of  the  papers.  The  editorial  pages,  espe- 
cially, contain  a  remarkable  amount  of  expert  and  expres- 
sive writing." 

Colonel  George  Harvey,  president  of  Harper  &  Brothers 
and  one  of  the  most  honored  figures  in  the  American 
world  of  journalism  and  literature,  is  equally  generous  in  his 
judgment  of  the  latter-day  newspaper  press  and  equally 
hopeful  in  his  outlook.  Many  critics,  lacking  the  fine  lit- 
erary sensibility  of  these  men,  have  deemed  it  incumbent 
upon  them  to  be  pessimistic.  They  have  professed  to  see 
nothing  but  unmitigated  harm  in  the  wave  of  sensational- 
ism which  has,  truly,  swept  over  the  country  within  the  last 
twenty-five  or  thirty  years,  and  from  the  influence  of  which 
not  even  the  staidest  of  the  old  guards  of  daily  journalism 
has  entirely  escaped.  Yet  to  the  writer  of  this  resume,  too, 
the  situation  seems  not  so  unmitigatedly  gloomy  as  the  pes- 
simists would  have  us  believe.  That  the  school  of  humor 
which  the  quick-printing  color  press  has  foisted  upon  us  is  a 
horror  is  not  to  be  denied.  That  the  effect  upon  young 
minds  and  upon  uneducated  minds  of  all  ages  of  the  con- 
stant preaching  of  class  antagonism,  the  constant  exploit- 
ing of  crime  and  sordid  tragedy,  is  deplorable  is  also  not  to 


410  PROGRESS  OF  THE   EMPIRE   STATE 

be  controverted.  But  just  as  the  cheap  magazines — cheap 
being  used  here  in  relation  to  the  sort  of  intellectual  pabulum 
they  offer  their  readers  and  not  to  their  price — effected  their 
own  cure  by  the  very  harm  which  they  wrought,  so  with  the 
sensational  daily  newspapers.  They  attract  a  class  of  read- 
ers who  might  never  read  a  printed  line  if  our  estimable 
Tribune,  our  worthy  Times,  and  even  our  brilliant  Sun,  were 
the  only  daily  journals  on  the  market.  To  those  who  buy 
the  others,  the  sensational  newspapers,  these  productions 
are,  as  it  were,  a  primer;  from  them  the  habit  of  reading 
grows.  It  is  doubtful  if  the  readers  of  the  more  objec- 
tionable of  the  "screamers"  are  the  same  from  year  to  year. 
The  class  to  which  their  appeal  is  particularly  addressed 
may  rapidly  outgrow  the  appeal,  and  seek  a  more  worthy 
source  of  information. 

Meantime  these  dailies,  with  their  prodigious  ability, 
their  unequaled  generosity  in  many  causes  which  the  old- 
time  newspaper  regarded  as  not  at  all  its  province,  have  not 
only  been  a  primer  in  which  the  ignorant  have  learned  to 
read  the  news,  but  they  have  also  been  the  means  of  infus- 
ing a  new  life  and  vigor  into  the  more  conservative  journals. 

The  frequent  complaint  against  modern  journalism — 
that  it  is  offensively  personal — cannot  be  altogether  ignored. 
It  is  offensively  personal;  it  is  often  gratuitously  insulting, 
outrageously  meddlesome.  Undoubtedly  when  the  British 
press  was  feebly  struggling  toward  that  "freedom"  which 
the  nation  now  regards  as  the  bulwark  of  its  liberties,  kings 
and  ministers,  nobles  and  parliaments,  felt  the  same  thing 
to  be  true  of  it.  With  a  change  of  sovereigns,  the  situation 
is  not  so  very  different.  The  regnant  American  citizen 
finds  himself  in  much  the  same  position  in  which  George  IV., 
for  example,  found  himself  when  young  Mr.  Leigh  Hunt 
was  sent  to  prison  for  writing  about  his  liege.  That  some 
restraint  should  be  put  upon  the  publishers  of  newspapers 


DEVELOPMENT  OF  THE  PERIODICAL  PRESS       411 

can  scarcely  be  denied;  but  that  the  idea  of  private  rights, 
based  upon  a  purely  individualistic  conception  of  society 
should  give  way  to  another  conception  is  far  from  being  an 
absolute  evil. 


INDEX  TO  THIS  VOLUME 


Achelis,  Thomas,  career  of,  335. 

Albany,  meeting  of  Colonial  Congress 
at,  13. 

Aldrich,  Nelson  W.,  aids  in  framing 
currency  law,  146. 

Alexander,  James  W.,  retires  from  Equit- 
able Life  Assurance  Society,  178. 

Alexander  VI.,  Pope,  makes  grant  to 
Spain,  1. 

Alsop,  Richard,  business  career  of,  345. 

Amalgamated  Copper  Co.,  flotation  of, 
86;  loses  control  of  copper  market, 
168;    incorporation  of,  205. 

American  Bankers'  Association,  creates 
committee  to  cooperate  with  New 
York  Chamber  of  Commerce,  145. 

American  Beet  Sugar  Co.,  incorporation 
of,  203. 

American  Cigar  Co.,  organization  of,  209. 

American  Institute,  aids  American  in- 
dustry, 346. 

American  Malting  Co.,  organization  of, 
222. 

American  Opera  Co.,  establishment  of, 

344- 
American    Smelting    &    Refining    Co., 

origin    of,    213;     relation    to    other 

corporations,  215. 
American  Sugar  Refining  Co.,  origin  of 

192;    incorporation  of,  200;    relations 

with  Beet  Sugar  Co.,  203;    criticism 

of  methods  of,  204. 
American    Tobacco    Co.,    incorporation 

of,    206;     extends   its   hoi  lings,    207; 

number  of  concerns  in,  21 1 ;   dissolved 

by  Supreme  Court,  212;    distribution 

of  ownership,  213. 
American  Trading  Co.,  development  of, 

103. 
Amsinck,  L.  E.,  business  career  of,  342. 
Anaconda  Copper  Mining  Co.,  income 

account  of,  206. 
Andros,   Edmund,  takes  possession  for 

England,    7;      returns    as    Captain- 
General,  9. 
Arbuckle    Bros.,    enter    field    of    sugar 

refining,  201. 


Archbold,  John  D.,  interest  in  Standard 
Oil  Co.,  194. 

Architecture,  samples  of  different  periods, 
356. 

Arnold,  Constable  &  Co.,  origin  of,  317. 

Arthur,  Chester  A.,  becomes  President, 
38;  appoints  Charles  J.  Folger  Sec- 
retary of  the  Treasury,  132;  attains 
prominence,  324. 

Aspinwall,  John,  residence  in  Flushing, 

315- 

Aspinwall,  William  H.,  takes  interest 
in  Panama  railroad,  341. 

Astor,  John  Jacob,  fortune  of,  65;  ar- 
rives from  Heidelberg,  349. 

Astor,  William  B.,  estimated  fortune  of, 

65- 
Astor  Hotel,  opening  of,  356. 
Atlantic  Monthly,  literary  character  of, 

393- 

Atlantic  Mutual  Marine  Insurance  Co., 
366. 

Auburn,  meeting  at,  to  organize  Republi- 
can party,  32. 

Auctioneering,  early  development  of, 
338. 


15 


Bancroft,  George,  residence  of,  316. 

Bankers  of  New  York,  assume  most  of 
the  financial  burden  of  the  Civil  War, 
116;  unite  with  those  of  other  cities 
to  take  war  loan,  117;,  object  to 
methods  of  Secretary  Chase,  118; 
take  the  lead  in  urging  specie  resump- 
tion, 129;  oppose  Mr.  Bryan  in  1896, 

139- 

Banking  houses,  list  of  early  firms,  374. 
Bank  Note  Detector,  issued  in  New  York, 

366. 
Bank  of  England,  changes  in  discount 

rate,  155. 
Bank  of  Germany,  raises  discount  rate 

in  1905,  174. 
Bank  of  New  York,  The,  origin  of,  263. 
Bank  reserves,  decline  of,  in  1905,  175. 
Banks,   suspend   specie   payments,   66; 

resources  of  in  191 1,  79;  country  re- 


413 


414 


INDEX 


Banks — Continued 

serves  of,  in  New  York,  88;  statistics 
of,  90. 

Barclay  &  Livingston,  business  of,  329. 

Baring  Bros.,  connection  with  crisis  of 
x893,  77;  failure  in  1890  causes  alarm, 
135;   failure  of,  379. 

Barker,  Jacob,  arrested  for  alleged 
challenge,  274. 

Beecher,  Henry  Ward,  comes  to  Brook- 
lyn. 3I3- 

Belgian  granite  blocks,  adopted  for 
paving,  319. 

Bell,  Alexander  Graham,  perfects  tele- 
phone, 347. 

Belmont,  August,  Sr.,  death  of,  80; 
civic  activity  of,  95. 

Belmont,  August,  Jr.,  services  in  con- 
structing first  subway,  95;  character 
of,  372. 

Belmont,  August,  &  Co.,  subscribed  for 
government  bonds,  127. 

Berkeley,  Lord,  receives  grant  of  New 
Jersey,  7. 

Biddle,  Nicholas,  attempt  to  corner 
cotton,  64;  share  in  panic  of  1833, 
276. 

Bierwirth,  Leopold,  business  career  of, 

35i- 
Bigelow,  John,  residence  of,  316. 
Black,  Frank  S.,  elected  governor,  41. 
"Black   Friday,"  gold  speculation  on, 

290. 
Blackstone  Canal,  stock  of,  273. 
Blaine,    James    G.,    assails    Secretary 

Fairchild,  137. 
Bland  silver  act,  passage  by  Congress, 

132. 
Bliss,  Cornelius  N.,  career  of,  332. 
Bloch,  Adriaen,  reaches  New  York,  4. 
Bogart,  Orlando  M.,  buys  auctioneers' 

notes,  339. 
Booth,   Edwin,   appearance  at   Winter 

Garden,  358. 
Borgfcldt,   George,   business  career  of, 

346. 
Boston,  effect  of  fire  in  1872,  75;    diffi- 
culty of  journey  from,  to  New  York, 

269;   effect  of  fire  on  speculation,  292 ; 

early  literary  supremacy  of,  405. 
Bowen  &  McNamee,  suspension  of,  331. 
Bowery,  frequented  by  Germans,  324. 
Bowery  Theatre,  character  of,  326. 
Bowling  Green,  fashionable  quarters  in, 

315-     „ 
Bowne,   Robert,   gives  employment   to 

John  Jacob  Astor,  349. 
Braddock,  General,  effect  of  defeat  in 

New  York,  14. 
Bradford,  William,  first  printer   in  the 

colony,  12. 


Brady,  Anthony  N.,  becomes  factor  in 

tobacco  business,  208. 
Bragaw,  William,  career  of,  321. 
British- American  Tobacco  Co.,  organiza- 
tion of,  210. 
Bronx  River,  origin  of  name,  314. 
Brooklyn,  character  of,  313. 
B rower,  John   H.,  brings  cotton  from 

Texas,  352. 
Brown,    Alexander,    &    Sons,    establish 

branch  in  New  York,  274. 
Brown  Bros.  &  Co.,  origins  of,  95. 
Brown,  Charles  Brockden,  literary  career 

of,  395- 
Brush,  Edward,  vice-president  American 

Smelting  Co.,  214. 
Bryant,  William  Cullen,  literary  career 

of,  398. 
Buchanan,  James,  sells  Treasury  notes, 

115- 

Buildings,  expenditure  on,  in  New  York 
City,  172. 

Bull's  Head  stage  line,  route  of,  319. 

Burlingame,  Anson,  kept  waiting  at 
Grace  Church,  357. 

Burr,  Aaron,  candidate  for  Vice-Presi- 
dent, 20;    duel  with  Hamilton,  113. 

Bush,  Irving  T.,  inaugurates  freight 
terminal  in  Brooklyn,  104. 

Bush  Terminal  Co.,  development  of,  105. 


Cable  Building,  associations  of,  358. 
California,  effect  of  gold  output  of,  65. 
Cammack,  Addison,  bear  operations  of, 

293- 

Canada,  movement  against,  13;  up- 
rising of  1837-38,  28. 

Canal  ring,  attacked  by  Governor  Til- 
den,  36. 

Canals,  corruption  in  management 
checked,  36;   improvement  of,  48. 

Canal  Street,  early  history  of,  317. 

Cannon,  Henry  W.,  Comptroller  of  the 
Currency,  141. 

Capital,  conversion  into  fixed  forms,  228 ; 
absorption  of,  in  recent  wars,  241. 

Capon,  Arthur,  early  career  of,  331. 

Carnegie,  Andrew,  share  in  organizing 
United  States  Steel  Corporation,  221; 
criticism  of  speculation,  295. 

Carnegie  Trust  Co.,  suspends  payment, 

99- 
Caroline,  burning  of,  28. 
Central  bank,  recommended  by  Chamber 

of  Commerce  committee,  144. 
Chamber  of  Commerce  of  New  York, 

recommends    increased    taxation    to 

carry  on  Civil  War,  119;  adopts  plan 


INDEX 


415 


Chamber  of  Commerce — Continued 
for  currency  reform,  144;    organized 
in  Fraunce's  Tavern,  268. 

Champlain,  Samuel  de,  first  governor,  3. 

Chase,  Salmon  P.,  negotiates  with  New 
York    bankers,    no;     demands 
ment  of  bank  loans  in  coin,  118;    fails 
to  recommend  adequate  taxation,  1  [9. 

Chatham  Square,  millinery  shops  in, 
319;    decline  of,  322. 

Chemical  National  Bank,  weathers  panic 
of  1857,  368. 

Chesterman  &  Hoguet,  business  1 

of,  338- 

Chicago  Board  of  Trade,  price  of  wheat 
on, 150. 

Chicago,  Burlington  &  Quincy  Railway, 
purchased  by  Northern  Pacific,   161. 

Chicago  fire  of  1871,  75;  effect  on 
speculation,  292. 

China  &  Japan  Trading  Co.,  develop- 
ment of,  102. 

Choate,  Joseph  H.,  career  of,  40;  resi- 
dence  of,  316. 

Civil  War,  enlistments  for,  34;  influence 
of  on  Stock  Exchange,  286. 

Claflin,  H.  B.  &  Co.,  development  of,  331. 

Claflin,  John,  member  of  Committee  on 
Currency  Reform,  144;  influence  in 
United   Drygoods  Companies,  224. 

Clark,  Dodge  &  Co.,  early  standing  of, 
284. 

Clark,  Dumont,  member  of  Committee 
on  Currency  Reform,  144. 

Clark,  Myron  H.,  elected  Governor,  32. 

Clearing  House,  certificates  first  resorted 
to  in  i860,  68;  origins  of,  93;  varia- 
tions in  volume  of  transactions,  94; 
withdrawal  of  trust  companies  from, 
99;  joined  by  Assistant  United  States 
Treasurer,  131;  certificates  of ,  issued 
in  1907,  245;  organization  of,  284; 
certificates  of,  issue  of  1860-64,  287; 
established  in  1853,  367. 

Clearings,  decrease  of,  in  1897,  149; 
growth  of,  at  London  in  1905,  173. 

Cleveland,  Grover,  elected  Governor,  38; 
elected  President,  39;  election  due  to 
vote  of  New  York,  53;  stands  firmly 
for  gold  standard,  134;  calls  extra 
session  of  Congress,  135;  becomes 
trustee  of  Equitable  Life  Assurance 
Society,  180;  effect  of  Venezuelan 
message,  294. 

Clews,  Henry,  book  on  Wall  Street,  305. 

Clinton,  De  Witt,  candidate  for  Presi- 
dent, 2 1 ;  plans  for  extending  water- 
ways, 23. 

Clinton,  George,  British  Governor  of 
New  York,  13;  chosen  governor,  18. 

Coe,   George   S.,   opposes  legal    tender 


issues,    123,    advi  ■!    clearing 

house  certificates,  368. 

Coffe  .  attempts  to  corner,  343. 

Colden,  Cadwallader,  Lieutenant  Gover- 
nor, conflict  with  the  colonics,  15. 

niations,     industrial,     planned     in 
New  York  City,  187;    types  of,  190. 

Commission  merchant  ,  bu  iness  meth- 

of,  328. 

( Competition,  in  relation  to  business,  188. 

Conant,  Charles  A.,  member  Committee 
on  Currency  Reform,  141. 

Concrete,  use  in  construction,  355. 

Conkling,  Roscoe,  candidate  for  Presi- 
nl,  36;    resigns  from  Senate,  38. 

Consolidated  Lake  Superior,  goes  into 
bankruptcy,  169. 

Consolidated  Tobacco  Co.,  organization 
of,  209;  merged  with  other  companies, 
211. 

Constitutions,  dates  of  revision,  25. 

Construction,  modern  methods  of,  354. 

Continental  Congress,  chooses  New  York 
as  national  capital,  19. 

Continental  Tobacco  Co.,  allied  with 
American  Co.,  208. 

Cooke,  Jay,  aids  in  the  distribution  of 
government  bonds,   72;    becomes  in- 
volved in  Northern  Pacific  Syndii 
73;   failure  of,  75;   later  years,  76. 

Cooke,  Jay,  &  Co.,  aid  in  distributing 
public  debt,  128;  failure  of,  292; 
effect  of  failure  of,  371. 

Cooper,  James  Fcnimore,  literary  career 
of,  396. 

Cooper,  Peter,  residence  of,  316;  busi- 
ness career  of,  346. 

Cordage  trust,  failure  of,  294 ;  effects  of 
failure,  379. 

Corey,  William  E.,  president  United 
States  Steel  Corporation,  220. 

Corn  Exchange,  organization  of,  284. 

Cornell,  Alonzo  B.,  career  of,  37. 

Coming,  Erastus,  member  of  sub- 
committee on  war  finance,  120;  ques- 
tions legal  tender  measure,  121. 

Corre's  Hotel,  meeting  place  of  stock 
brokers,  264. 

Correspondence,  committees  of,  15. 

Cortelyou,  George  B.,  Secretary  of  the 
Treasury,  140;  on  the  crisis  of  1907, 
227. 

Cosby,  William,  administration  as  gover- 
nor, 12. 

Cotton,  fluctuations  in  price  of,  171. 

Country  banks,  keep  reserve  funds  in 
New  "York,  88. 

Credit,  expansion  of,  prior  to  1907,  234. 

Croswell,  Edwin,  political  power  at 
Albany, 26. 

Croton  Reservoir,  beginnings  of,  312. 


416 


INDEX 


Cunard  line,  refuses  to  join  steamship 

combination,  164. 
Currency,  premium  on,  in  1907,  245. 
Curtis,  George  William,  early  literary 

work  of,  391. 

D 

Dana,  Charles,  opinion  on  newspapers, 

400. 
Dash,  Bowie,  attempts  corner  in  coffee, 

343- 
Davis,   Jefferson,   stops   at   New  York 

Hotel,  359. 
Day,  William  A.,  becomes  president  of 

Equitable  Life  Assurance  Society,  180. 
Debtors'  jail,  functions  of,  339. 
Decatur,  Stephen,  protects  New  York, 

22. 
Declaration    of   Independence,   support 

pledged  by  state  convention,  18. 
Degener,  John  F.,  career  of,  336. 
De  Lancey,  James,  lieutenant-governor, 

13- 

Delaware  &  Raritan  Canal  Co.,  stock 
subscriptions  to,  61. 

Department  stores,  origin  of,  327. 

Dcpew,  Chauncey  M.,  career  as  senator, 
46. 

Dewey,  Admiral  George,  destroys  Span- 
ish fleet  at  Manila,  154. 

Dickinson,  Charles  C,  career  of,  100. 

Direct  nominations,  45. 

Dix,  John  A.,  elected  governor,  35. 

Dix,  John  A.,  Secretary  of  the  Treasury, 
116. 

Dodge,  William  E.,  career  of,  350. 

Dommerich,  Louis  F.,  business  career  of, 
334- 

Draft  riots,  33. 

Draper,  Simeon,  sells  captured  Confeder- 
ate vessels,  340. 

Drcier,  Theodore,  engaged  in  iron  busi- 
ness, 351. 

Drew,  Daniel,  early  wealth  of,  284; 
methods  of  speculation,  291,  369. 

Drew,  Robinson  &  Co.,  early  wealth  of, 
284. 

Drexel,  origin   of  the  family,  373. 

Duke,  James  B.,  president  American 
Tobacco  Co.,  206. 

Duke's  laws,  promulgated  by  Duke  of 
York,  7. 

Duncan,  Sherman  &  Co.,  involved  in 
decline  of  cotton,  372. 

Dutch,  enter  unoccupied  lands,  1 ;  regain 
New  York,  6. 


Eames,  Francis  L.,  history  of  the  Stock 
Exchange,  268;    promotes  establish- 


ment of  stock  exchange  Clearing 
House,  294. 

Education,  development  of,  47. 

Egypt,  speculation  in,  174. 

Elevated  railways,  beginnings  of,  320. 

Ellsworth,  Elmer  W.,  forms  regiment  of 
Zouaves,  364. 

Embargo  Act  of  1807,  21. 

English,  grasp  Atlantic  coast,  1 ;  capture 
New  York,  6;  issues  of  securities  for 
Boer  war,  155 

Eno,  Amos  R.,  career  of,  330. 

Equitable  Life  Assurance  Society,  quar- 
rel over  management  of,  177;  placed 
in  charge  of  trustees,  180. 

Erie  Canal,  plans  for  construction  of,  23 ; 
opening  of,  61 ;   completion  of,  274. 

Erie  Railroad,  comes  under  control  of 
Fisk  and  Gould,  70;  over-issue  of 
stock,  71;    wars  over  securities,  291. 

Evans,  Henry,  connected  with  Continen- 
tal Insurance  Co.,  362. 

Evarts,  William  M.,  career  of,  37;  resi- 
dence of,  316. 

Everybody's  Magazine,  circulation  of, 
406. 


Fairchild,  Charles  S.,  Secretary  of  the 
Treasury,  137. 

Farmers  Loan  &  Trust  Co.,  mentioned 
by  Philip  Hone,  283. 

Farrell,  James  A.,  president  United 
States  Steel  Corporation,  220. 

Faulkner,  Page  &  Co.,  business  of,  332. 

Federalists,  secure  majority  in  Legis- 
lature, 1789,  20. 

Fenton,  Reuben  E.,  career  of,  34. 

Feudal  tenure,  causes  Rebellion  of  1836, 
30. 

Field,  Cyrus  W.,  business  career  of,  341 ; 
appears  at  firemen's  ball,  364. 

Fillmore,  Millard,  elected  Vice-President, 

31. 

Fire  Department,  early  history  of,  363. 
Fire  insurance,  early  development  of,  361 . 
Fire  of  December,  1835,  279. 
Fire-proof  buildings,  list  of,  353. 
Fish,   Hamilton,   elected   governor,  31 ; 

becomes  Secretary  of  State,  35. 
Fish,  Preserved,  residence  of,  316. 
Fish  &  Grinnell,    business    career    of, 

34i- 

Fisk,  James,  control  of  Erie  Railroad,  70; 
associations  with  Grand  Opera  House , 
359. 

Fisk  &  Hatch,  connection  with  refund- 
ing, 128. 

Five  Nations,  denounced  by  French 
king,  4. 


INDEX 


417 


Flower,    Roswcll    P.,   elected   governor, 
40;  supports  sound  money  in  Congress, 

138. 

Fogg,    William    H.,    engages    in    China 

trade,  322. 
Folger,  Charles  J.,  defeated  for  governor, 

38;   Secretary  of  the  Treasury,  132. 
Foreign  affairs,  influence  of  New  York 

upon, 55. 
Foreign  exchange,  value  of,  95;    turns 

in  favor  of  United  States  in  1907,  259; 

early  vicissitudes  of,  376. 
Foreign  trade  of  New  York,  311. 
Forrest,  Edwin,  residence  of,  316. 
Fort  Orange,  built  by  Walloons,  4. 
Fort  Wayne  corner,  289. 
France,  security  issues  in,  230. 
Fraunce's  Tavern,  used  by  Chamber  of 

Commerce,  268. 
Free  banking  law,  enactment  of,  284. 
French,  discover  St.  Lawrence,  1. 
Frontenac,  burns  Schenectady,  4. 
Fuller,  William  W., 'counsel  for  American 

Tobacco  Co.,  213. 
Fulton,  Robert,  residence  of,  315. 


Gage,  Lyman  J.,  Secretary  of  the  Treas- 
ury, 139. 

Gallagher's  Stock  Exchange,  opened 
1865,  288. 

Gallatin,  James,  opposes  legal  tender 
issues,  123. 

Gallatin  National  Bank,  absorbed  by 
Hanover  National,  101. 

Gary,  Elbert  H.,  acting  head  United 
States  Steel  Corporation,  220. 

Gebhard,  Fred,  business  career  of,  371. 

German-American  Fire  Insurance  Co. 
362. 

Germans,  character  of  northern  immi- 
grants, 340. 

Germany,  issues  of  new  securities  in, 
173,  230;  efforts  to  maintain  high 
prices,  240. 

Gilder,  Richard  Watson,  opinion  on 
newspapers,  408. 

Gold  certificates,  provided  for  in  1882, 

133- 

Gold  exchange,  operations  of,  during 
Civil  War,  288;   location  of,  370. 

Gold,  increase  of  imports  in  1897,  150; 
production  of,  checked  by  war  in  South 
Africa,  155;  resumed  after  close  of 
war,  170;  influence  of  California 
discoveries  on  stock  market,  284; 
speculation  in,  287. 

Gold  payments,  resumed  at  New  York 
Clearing  House,  132;  threatened  by 
silver  legislation,  134. 


Gold  Standard  act,  approved  by  Presi- 
dent McKinley,  140;  supported  by 
A.  Barton  Hepburn,  141;  supported 
in  Congress  by  J.  Murray  Mitchell, 
142;  prepared  by  caucus  committee, 
143;   beneficial  effects  of,  247. 

1  ri  idea  Hill,  conflict  with  soldiers  at,  17. 

Goldman,  Sachs  &  Co.,  origins  of,  374. 

Goluchowski,  Count,  fear  of  American 
competition,  151. 

Gouge,  William  M.,  discusses  early 
speculation,  262. 

Gould,  Edwin,  member  of  Stock  Ex- 
change, 304. 

Gould,  George  J.,  member  of  Stock 
Exchange,  304. 

Gould,  Jay,  control  of  Erie  Railroad, 
70;  operations  of,  in  gold  pool,  75; 
death  of,  80;  share  in  Erie  specula- 
tion, 291. 

Gorman,  Arthur  P.,  willing  to  compro- 
mise with  silver,  136. 

Governors,  in  colonial  times,  8. 

Grace  Church,  architecture  of,  357. 

Grace,  W.  R.,  career  of,  345. 

Gramercy  Park,  foundation  of,  316. 

Grand  Opera  House,  associations  of,  359. 

Grant,  Ulysses  S.,  loses  vote  of  New 
York  in  1868,  35;  supported  for 
third  term,  37;  conference  with  New 
York  bankers  in  panic  of  1873,  130; 
New  York  bankers  aid  in  protecting 
government  gold  fund,  131. 

Grant  &  Ward,  failure  of,  in  1884,  76, 
292,  378. 

Great  Britain,  security  issues  in,  230. 

Greeley,  Horace,  enters  politics,  29; 
candidate  for  President,  35;  residence 
of,  316;  newspaper  career  of,  407. 

Greenbacks,  recommended  by  Elbridge 
G.  Spaulding,  120. 

Greenwich  Village,  brick  cottages  in, 
316;   old  buildings  in,  353. 

Grocery  business,  early  development  of, 
340;   development  of  wholesale  trade, 

343- 
Guggenheim,  Daniel,  president  American 

Smelting  &  Refining  Co.,  214. 
Guggenheim,  Meyer,  founder  of  remark- 
able family,  214. 
Guggenheim,     Simon,     United     States 

senator  from  Colorado,  214. 
Guggenheim,     Solomon      R.,     director 

American  Smelting  &   Refining   Co., 

214. 
Gunther,    Charles    G.,    establishes    fur 

business,  345. 

H 

Hackctt,  Frank  W.,  describes  panic  of 
1873-  130. 


4i8 


INDEX 


Hadley,  William  T.,  definition  of  specu- 
lation, 308. 
Haggerty,  John,  business  career  of,  338. 
Half  Moon,  enters  Hudson,  3. 
Halleck,  Fitz-Greene,  literary  work  of, 

397- 
Hallgarten  &  Herzfeld,  early  history  of, 

373- 

Hamilton,  Alexander,  aids  in  framing 
Constitution,  18;  influence  upon 
American  finance,  56;  large  share  in 
finances  of  New  York,  109;  Secretary 
of  the  Treasury,  110;  reorganizes  the 
national  debt,  in ;  return  to  New 
York,  112;  reports  in  favor  of  assum- 
ing state  debts,  262;  buys  govern- 
ment bonds  to  steady  market,  263; 
home  of,  316. 

Hanna,  Hugh  H.,  promotes  gold  standard 
legislation,  142. 

Hanover  Square,  drygoods  center,  323. 

Harper's  Magazine,  origins  of,  394; 
English  opinion  of,  403. 

Harriman,  Edward  H.,  career  of,  87; 
share  in  Northern  Pacific  corner,  166; 
speculative  railway  ambitions  of,  177; 
shares  in  industrial  organization,  295; 
admitted  to  Stock  Exchange,  304. 

Harrison,  William  Henry,  defeats  Van 
Buren  for  President,  114. 

Harvey,  Col.  George,  opinion  on  news- 
papers, 409. 

Hatch,  A.  S.,  compelled  to  resign  as 
president  of  Stock  Exchange,  292. 

Haussmann,  Baron,  rules  regarding  high 
buildings,  356. 

Havemeyer,  H.  O.,  forms  American 
Sugar  Refining  Co.,  200;  explains 
attitude  of  Sugar  Refining  Co.,  205; 
relation  to  sugar  trust,  342. 

Hayes,  Rutherford  B.,  vetoes  silver 
bill,  132. 

Hedges,  Job  E.,  candidate  for  governor, 

45- 

Hepburn,  A.  Barton,  Comptroller  of  the 
Currency,  141 ;  chairman  of  Commit- 
tee on  Currency  Reform,  145. 

Hepburn  act,  passes  Congress,  185. 

Herbert,  Henry  William,  literary  career 
of,  391. 

"  Hermitage,"  origin  of,  314. 

Hessenberg,  Gustavus,  career  of,  336. 

Hewitt,  Abram  S.,  career  of,  346 

Higgins,  Frank  W.,  elected  governor,  42. 

Hill,  David  B.,  career  of,  39. 

Hill,  James  J.,  ownership  of  Great  North- 
ern stock,  166;  discusses  undigested 
securities,  169. 

Hiscock,  Frank,  career  of,  46. 

Hoffman,  John  T.,  chosen  governor, 
35- 


Holding  companies,  development  of, 
after  1900,  161;   origin  of,  192. 

Holland  dwellings,  existing  in  Green- 
wich Village,  353. 

Holland  Land  Co.,  acquires  large  estates, 

19- 

Holmes,  Dr.  Oliver  Wendell,  literary 
work  of,  393 

Home  Fire  Insurance  Co.,  362. 

Hone,  John,  residence  of,  on  Whitehall 
Street,  315. 

Hone,  Philip,  diary  of,  275;  describes 
prostration  of  1837,  281. 

Hooper,  Samuel,  cooperates  with  Mr. 
Spaulding  in  war  legislation,  120. 

Horse  car  lines,  early  history  of,  320. 

Hoyt,  Sprague  &  Co.,  failure  of,  371. 

Hudson,  Henry,  enters  North  River,  3. 

Hudson  River  railroad  stage,  early  his- 
tory of,  32 1 . 

Hughes,  Charles  E.,  career  of,  43; 
conducts  insurance  investigation,  179; 
appoints  commission  on  Stock  Ex- 
change, 299. 

Hunt,  Wilson  G.,  career  of,  329. 

Hunter's  Point,  origin  of  name,  314. 

Hyde,  James  H.,  resignation  from  Equit- 
able Life  Assurance  Society,  178; 
sells  control  of  society,  180. 


I 


Indianapolis  Monetary  Commission,  pro- 
motes gold  standard  law,  143. 

Industrial  combinations,  growth  of,  after 
1890,  157 ;  planned  in  New  York  City, 
187;  classification  of,  198;  regulation 
of,  in  New  York,  224;  influence  on 
prices,  225 

Ingersoll,  Robert  G.,  financial  methods 
of,  348. 

Insurance  investigation  of  1905,  con- 
ducted by  Charles  E.  Hughes,  179. 

International  Mercantile  Marine,  for- 
mation of,  164. 

Irish,   predominate  at   "Five   Points," 

324- 
Iron,    increased    demand   for,  in   1899, 

159;   increased  production  of ,  in  1906, 

173;   importers  of,  335. 
Iroquois,  resist  French  invasion,  4. 
Irving  House,  historical  associations  of, 

358. 
Irving    Theatre,    devoted    to    German 

plays,  359-  .,  . 

Irving,  Washington,  residence  of,  316; 

inspires  foundation  of  Astor  Library, 

350;   early  career  of,  396. 
Iselin,  Adrian,  business  career  of,  337. 
Italians,  immigration  of,  325. 


INDEX 


419 


Jackson,  Andrew,  receives  vote  of  New 

York  in  1832,27;   checks  inflation,  64. 

James,  Thomas  L.,  resigns  as  Post- 
master-General, 38. 

Japan,  makes  war  on  Russia,  172;  rise 
of  prices  in,  174;  cost  of  war  with 
Russia,  242. 

Jay,  John,  placed  on  committee  of  col- 
onies, 17;  appointed  Chief  Justice,  18. 

Jefferson,  Joe,  plays  at  Winter  Garden, 

359- 
Jews,  character  of,  325. 
Jobbers,  business  methods  of,  328. 
Johnson,    Reverdy,   attends   conference 

in  New  York,  130. 
Johnson,  Sir  William,  begins  career,  13; 

confers  with  Six  Nations,  16. 
Johnston,  John  Taylor,  sells  art  treasures, 

350. 
Jordan,     Conrad     N.,     United     States 

Treasurer,  137. 
Judicial  tenure,  conflict  over,  14. 
juilliard,  A.   D.,  becomes  receiver  for 

Hoyt,  Sprague  &  Co.,  371. 

K 

Kartells,  character  of,  192. 

Keene,    James    R.,    relation    to    Stock 

Exchange,  304. 
Kelly,  Eugene,  &  Co.,  business  methods 

of,  373- 
King,  Edward,  rehabilitates  Union  Trust 

Co.,  371. 
King,   Rufus,   receives   Federalist   vote 

for  President,  23;    settles  in  Jamaica, 

315- 
Knickerbocker     Magazine,     origins     of, 

388. 
Knickerbocker  stage  line,  route  of,  319. 
Knickerbocker    Trust    Co.,    closes    its 

doors,  244. 
Knox,    John    J.,    Comptroller    of    the 

Currency,  140. 
Knox,  Philander  C,  enters  suit  against 

Northern  Securities  Co.,  182. 
Kohlsaat    Bros.,    established    in    New 

York,  333. 
Kreft,  William,  defeated  by  Indians,  5. 
Kremer,    William    N.,    connected    with 

German-American  Fire  Insurance  Co., 

363- 
Kuhn,  Loeb  &  Co.,  career  of,  96. 


Lakes,  an  asset  of  the  State,  2. 
"  Lambs,"  early  synonym  for,  280. 
Land  values,  speculation  in,  172. 


Landis,  Kenesaw  C,  fines  Standard  Oil 
Co.,  184. 

Lapham,  Elbridge  G.,  elected  senator,  38. 

Lathers,  Col.  Richard,  career  of ,  365. 

Law,  John,  originates  Mississippi  Bubble, 
261. 

Ledyard,  Lewis  Cass,  becomes  trustee  of 
Equitable  Life  Assurance  Society,  180. 

Lefferts,  Marshall,  constructs  early  tele- 
phone lines,  349. 

Legal  lender  notes,  reluctantly  approved 
by  Secretary  Chase,  124. 

Lehigh  Coal  &  Navigation  Co.,  organi- 
zation of,  273. 

Leipziger  Bank,  failure  of,  240. 

Leister,  Jacob,  assumes  governorship, 
10;  hanged  for  treason,  1 1 . 

Lincoln,  Abraham,  receives  vote  of  New 
York,  32. 

"Little  Italy,"   established   in   Harlem, 

325- 

Little,  Jacob,  becomes  prominent  in 
stock  market,  276;  engaged  in  bull 
pool,  282. 

Livingston,  Robert,  R.,  appointed  chan- 
cellor, 18. 

Lord  &  Taylor,  business  of,  319. 

Lorillard,  Jacob,  estimated  fortune  of, 

65- 
Lorillard,  Pierre,  business  beginnings  of, 

3J4- 

Loudon,   Earl  of,  Commander-in-Chief 

of  British  forces,  14. 
Lovelace,  Francis,  second  Governor  of 

New  York,  7. 
Low,  A.  A.,  &  Bros.,  career  of,  322. 


M 


McClure's  Magazine,  success  of,  406. 

McCulloch,  Hugh,  becomes  head  of 
London  branch  of  Jay  Cooke  &  Co., 
74;  encourages  refunding  of  debt,  129. 

McGowan's  Pass,  early  history  of,  313. 

McKinley,  William,  approves  gold  stand- 
ard act,  140. 

McLeod  combination,  collapse  of,  294. 

Mabon,  James  B.,  member  of  Stock  Ex- 
change, 306. 

Macy,  R.  H.,  career  of,  326. 

Mali,  Pierre,  becomes  Belgian  consul, 
35o. 

Manhattan,  early  boundary  of,  317. 

Manning,  Daniel,  Secretary  of  the 
Treasury,  137. 

Manufactures,  growth  of,  49;  condition 
of,  in  1899,  152. 

Marcy,  William  L.,  career  of,  27. 

Marine  Bank,  failure  of,  292. 

Marine  insurance,  365. 


420 


INDEX 


Marvel,  Ik,  writes  Reveries  of  a  Bachelor, 

390. 
Medbury ,  James  K. ,  book  on  Wall  Street, 
270;    discusses  Stock  Exchange,  290. 
Mercantile   National   Bank,  appeals  to 

Clearing  House  for  aid,  244. 
Merchant,  Charles  C,  career  of,  318. 
Merriam,  Benjamin  W.,  relations  with 

Roosevelt  family,  349. 
Metropolitan  Hotel,  associations  of,  358. 
Metropolitan  Life  Building,  architecture 

of,  357- 
Meyer,   Eugene,  Jr.,  member  of  Stock 

Exchange,  306. 
Miller,  Warner,  elected  senator,  38. 
Milliken,  Seth  M.,  career  of,  332. 
Mining  stocks,  speculation  in,  377. 
Mississippi  Bubble,  origins  of,  261. 
Mitchell,  John  Murray,  supports  gold 

standard  law,  142. 
Mohawk    &    Hudson    River    Railroad, 

completion  of,  63. 
Mohawk  River,  relation  to  the  Hudson, 

2. 
Mollenhauer,  F.  C,  enters  sugar  refining 

industry,  202. 
Money,  high  rates  for,  in  1905,  176. 
Montcalm,  ravages  Lake  George  and  the 

Mohonk,  14. 
Moody,   John,   estimate   of   typewriter 

output,  222. 
Moore,  Sir  Henry,  governor,  16. 
Morgan,  E.  D.,  career  of,  344. 
Morgan,     J.     Pierpont,     beginning     of 
career,     81;      forms     United     States 
Steel  Corporation,  82;    checks  panic 
of  1907,  83 ;  stays  panic  after  Carnegie 
Trust  failure,  100;    relieves  effects  of 
Northern   Pacific  corner,   168;    takes 
over  control  of  Equitable  Life  Assur- 
ance Society,  180;  share  in  organizing 
United  States  Steel  Corporation,  221; 
shares  in  industrial  organization,  295; 
invents  term  "undigested  securities," 
296. 
Morris    Canal    Co.,    subscriptions    for 

stock,  273 ;  corner  in,  278. 
Morris,  Gouverneur,  estimated  fortune 

of,  65. 
Morris,    Robert,    head    of    Continental 

Treasury,  109. 
Morse,    James    R.,    becomes    president 

American  Trading  Co.,  103. 
Morse,  Samuel  F.  B.,  residence  of,  316. 
Morton,    Bliss    &    Co.,    subscribe    for 

government  bonds,  127. 
Morton,  Levi  P.,  elected  Vice-President, 

40;  early  career  of,  329. 
Munsey's  Magazine,  origins  of,  399. 
Murray,   Lawrence  O.,  Comptroller  of 
the  Currency,  141. 


N 


Nast,  Thomas,  cartoons  of,  399. 
National   banking  act,   influence  of,  on 

New  York,  68. 
National  Bank  of  Commerce,  expansion 

of,  85. 
National  banks,  increase  circulation  in 

I9°7.  252:  chief  subscribers  for  bonds 

in  1907,  256. 
National  City  Bank,  development  of,  85. 
National  debt,  made  payable  in  coin, 

125;    increase  through  rise  in  prices, 

126. 
National     Lead     Co.,     relations     with 

American  Smelting  Co.,  215. 
National  Lloyd's,  development  of,  365. 
National  Monetary  Commission,  author- 
ized by  Congress,  146. 
National  Sugar  Refining  Co.,  formation 

of,  202. 
National  Theatre,  on  Chatham  Square, 

359- 
Negroes,  alleged  plot  to  bum  New  York 

City,  12. 
New  Amsterdam,  convention  of,  in  1653, 

5- 
New  Jersey,  granted  to  Lord  Berkeley,  7. 
New  Jersey  Railroad,  early  history  of, 

321. 
New  York  bankers,  form  combination  to 

advance  gold  to  Treasury  in  1893,  134; 

take  part  of  British  loan,  156. 
New  York  City,  draft  riots  in,  33;  scope 

of  financial  development,  62;    attains 

financial  supremacy  before  1857,  65; 

becomes  sub-Treasury  city,  115;  finds 

difficulty  in  selling  bonds,  243 ;    banks 

of,  receive  public  money,  248;  deficit 

in  reserves  of,  in  1907,  258. 
New  York  Clearing  House,  discriminates 

against  silver,  133. 
New  York  Gazelle,  started  in  1725,  12. 
New  York  Hotel,  early  associations  of, 

359- 

New  York  Journal,  started  by  Peter 
Zenger,  12. 

New  York  Life  Building,  associations  of, 
358. 

New  York  State,  early  area  of,  2 ;  first 
settlement  by  white  men,  3;  contri- 
bution of  men  to  Civil  War,  34 ;  turns 
scale  in  national  elections,  52;  signi- 
ficant vote  for  Fremont  in  1856,  52; 
Presidents  and  Vice-Presidents  elected 
from,  54;  Secretaries  of  State  from,  55; 
other  cabinet  officers  from,  56;  policy 
towards  industrial  combinations,  225. 

New  York  University,  building  of,  316. 

New  York  Water  Works  Co.,  sales  of 
stock,  61. 


INDEX 


421 


Nicholson,  Francis,  acts  as  lieutenant- 
governor,  10. 

North  American  Review,  origins  of,  388. 

Northern  Pacific  Railroad,  supported 
by  Jay  Cooke  &  Co.,  74;  connection 
with  panic  of  1873,  75;  issues  bonds 
for  Burlington  stock,  162;  corner  in 
shares  in  1901,  166,  232,  296. 

Northern  Securities  Co.,  potential  power 
of,  177;  sued  by  government,  182; 
dissolved  by  Supreme  Court,  183. 


O 


O'Brien,  Morgan  J.,  becomes  trustee  o 
Equitable  Life  Assurance  Society,  180; 
character  of,  325. 

Odell,  Benjamin  B.,  Jr.,  elected  governor, 
42. 

Oelbermann,  Emil,  business  career  of, 

334- 
Oelrichs,   Herman,  occupies   downtown 

offices,  315. 
Ogden's    Ltd.,    acquired    by    American 

Tobacco  Co.,  210. 
O'Gorman,  James  A.,  elected  senator,  44. 
Ohio  Life  Insurance  &  Trust  Co.,  failure 

of,  66. 
Oriental  trade,  development  of,  102. 
Ottendorfer,  Oswald,  character  of,  324. 


Paine,  Thomas,  death  of,  316. 

Panama  Canal  bonds,  offered  to  public 
in  1907,  252. 

Panic  of  1837,  losses  in,  278. 

Panic  of  1857,  suddenness  of,  285; 
effects  of,  368. 

Panic  of  1873,  causes  of,  71 ;  conference 
of  bankers  with  President  Grant,  130. 

Panic  of  1874,  failures  in,  371. 

Panic  of  1893,  causes  of,  77;  promoted 
by  Sherman  law,  135;  effect  on  the 
railways,  152. 

Panic  of  1907,  relation  to  monetary 
reform,  145;  origins  of,  227;  issues 
of  new  securities  prior  to,  229;  reduc- 
tion of  bank  reserves,  234;  effect  of 
gold  production,  237;  failures,  in 
Germany,  240;  exhaustion  of  capital 
by  war,  241 ;  suddenness  of  the  crash, 
243 ;  issue  of  clearing  house  certificates, 
245;  action  of  Treasury  Department, 
247;  general  policy  of  the  Treasury, 
253;  refusal  to  interfere  with  gold 
movement,  257;  turning  point  of  the 
panic,  258;  causes  of,  298. 

Parker,  Alton  B.,  candidate  for  Presi- 
dent, 43;  sends  gold  telegram  to 
Democratic  convention,  84. 


Patti,  Adelina,  appearance  at  Niblo's, 

358. 
Paulding,  James  K.,  literary  career  of, 

397-  „  ,     „ 

Payne,  Sereno  E.,  career  of,  46. 

Peabody,  George  Foster,  makes  home  in 
Brooklyn,  313. 

Periodical  press,  development  of,  381; 
effect  of  producing  paper  from  wood 
pulp,  383;  improvement  in  presses, 
385;  number  of  publications  in  1873, 
387;  early  monthlies  and  quarterlies, 
388;  influence  of  Putnam's  Magazine, 
390;  development  of  the  newspaper 
press,  391;  origins  of  the  Atlantic 
Monthly,  392;  influence  of  Washing- 
ton Irving,  396;  careers  of  Cooper  and 
Bryant,  397;  modern  story  writers, 
401 ;  influence  of  "muck-raking, "  403  ; 
development  of  the  popular  magazines, 
406. 

Perkins,  George  W.,  profit-sharing  plan 
for  United  States  Steel  Corporation, 
221. 

Petroleum  and  Mining  Exchange,  378. 

Phelps,  Anson  G.,  business  career  of,  350. 

Phelps,  Royal,  career  of,  345. 

Philadelphia,  early  financial  supremacy 
over  New  York,  60;  relations  of,  to 
New  York  Stock  Exchange,  270. 

Philippines,  acquired  from  Spain,  154. 

Piatt,  Thomas  C,  resigns  from  Senate, 
38. 

Poe,  Edgar  Allan,  contributions  to 
periodical  literature,  389. 

Pomeroy,  Theodore  M.,  secures  pay- 
ment of  interest  on  public  debt  in 
coin,  125. 

Pools,  character  of,  191. 

Population,  growth  of,  48. 

Post,  James  H.,  enters  sugar  refining 
industry,  202. 

Prices  of  commodities,  rise  between  1897 
and  1907,  171;  rapid  rise  in  Russia 
in  1899,  239. 

Prime,  Ward  &  Co.,  failure  of,  282. 

Printing,  improvement  in  methods  of, 

384- 
Promoter,  common  use  of  the  name  on 

American  markets,  158. 
Public  money,  distribution  of,  in   1907, 

249. 
Putnam's  Monthly,  origins  of,  389. 


Queens  County,  early  history  of,  314. 


R 

Race-track  betting,  45. 


422 


INDEX 


Railroad  stocks,  fluctuations  of,  296. 

Railways,  beginnings  of,  26;  extension 
of,  prior  to  1857,  65;  new  construction 
prior  to  1873,  72;  placed  in  hands  of 
receivers  in  panic  of  1893,  153;  issues 
of  collateral  trust  bonds  by,  162. 

Raven,  Anton  A.,  president  of  Atlantic 
Mutual  Insurance  Co.,  366. 

Reading  stock,  early  activity  in,  283; 
collapse  of  combination,  294. 

Real  estate  title  companies,  origins  of, 

324- 
Reed  &  Sturges,  business  career  of,  343. 
Reform  Club,  early  history  of  building, 

335- 

"Regency,"  origin  of,  26. 

Reid,  Whitelaw,  career  of,  40. 

Reis,  Philip,  invents  form  of  telephone, 
347- 

Republican  party,  organization  of,  32. 

Reserve  deposits  in  New  York,  88. 

Resumption  of  specie  payments,  pro- 
vided for  by  act  of  1875,  131. 

Revolutionary  War,  first  conflicts  in 
New  York,  17. 

Richardson,  William  A.,  Secretary  of  the 
Treasury,  129. 

Ridgely,  W.  Barret,  recommends  cen- 
tral bank, 145. 

Robinson,  Lucius,  elected  governor,  37, 

Rockefeller,  John  D.,  organizes  oil  re- 
fining business,  193;  shares  in  indus- 
trial organization,  295;  member  of 
Stock  Exchange,  304. 

Roelandsen,  Adam,  first  schoolmaster 
from  Holland,  46. 

Rogers,  Henry  H.,  career  of,  86,  interest 
in  Standard  Oil  Co.,  194. 

Roosevelt,  Theodore,  early  career  of,  42 ; 
controls  state  convention  of  1910,  44; 
candidate  for  President  in  191 2,  45; 
policy  towards  corporations,  181. 

Roosevelt,  Theodore,  Sr.,  father  of 
President,  349. 

Root,  Elihu,  career  of,  41;  influence  as 
Secretary  of  State,  55. 

Root,  L.  Carroll,  perfects  report  of 
Monetary  Commission,  142. 

Rugglcs,  Samuel  B.,  founds  Gramercy 
Park,  316. 

Russo-Japanese  War,  absorption  of 
capital  in,  241. 

Ryan,  Thomas  F.,  career  of,  84;  share 
in  supportng  Judge  Parker,  84;  finan- 
cial power  of,  85 ;  buys  majority  stock 
of  Equitable  Life  Assurance  Society, 
180;  becomes  factor  in  tobacco  busi- 
ness, 208;  arranges  agreement  with 
Imperial  Tobacco  Co.,  210;  shares 
in  industrial  organization,  295. 

Ryswick,  Treaty  of,  4. 


Sage,  Russell,  death  of,  81. 

St.  John's  Park,  a  center  of  society,  316. 

St.  Nicholas  Hotel,  associations  of,  358. 

San  Francisco  earthquake,  effect  on 
speculation,  297. 

Schiff,  Jacob  H.,  secures  appointment  of 
Committee  on  Currency  Reform  by 
Chamber  of  Commerce,  144;  char- 
acter of,  325. 

Schley,  G.  B.,  owner  in  American  To- 
bacco Co.,  213. 

Schurz,  Carl,  character  of,  324. 

Schuyler,  Philip,  home  of,  316. 

Schwab,  Charles  M.,  valuation  of  ore 
properties,  219;  president  United 
States  Steel  Corporation,  220. 

Scott,  Gen.  Winfield  S.,  victories  at 
Chippewa  and  Lundy's  Lane,  22. 

Scribner's  Sons,  building  of,  357. 

Second   Street,   occupied   by   Germans, 

324-  . 
Securities,  foreign  issues  of,  148;    new 

issues  of,  in  1899,  158;  issues  of  1896- 

1906,  228;  quoted  in  1792,  268. 
Scligman,  James,  member  of  Stock  Ex- 
change, 305. 
Seligman,  Jesse,  subscribes  for  govern- 
ment bonds,  127. 
Seligman  &  Co.,  J.  &  W.,  development 

of,  97;  beginnings  of,  373. 
Seney,  George  I.,  business  experience  of, 

378. 
Seward,  William  H.,  enters  politics,  29; 

candidate  for  President,  30. 
Seymour,  Horatio,  career  of,  25;  elected 

governor    1862,    33;     candidate    for 

President,  35. 
Shaw,    Leslie    M.,    Secretary    of    the 

Treasury,  140. 
Sherman,  James  S.,  career  of,  44;  death 

of,  46. 
Sherman  silver  purchase  law,  invokes  a 

crisis,  134. 
Shipman  &  Corning,  failure  of,  in  1833, 

276. 
Short  selling,  prohibited  by  law  in  181 2, 

276. 
Signs,  curious  character  of,  360. 
Silver  certificates,  must  be  received  by 

Clearing  House,  133. 
Silver,  relations  of  Guggenheims  with 

London  market,  214. 
Simmons,  J.  Edward,  chosen  president 

of  Stock  Exchange,  292. 
Sloan,  Samuel  J.,  character  of,  325. 
Smith,  Charles  Stewart,  career  of,  337. 
Soughter,    Henry,    arrives  as  governor, 

11. 
South  Africa,  gold  production  in,  155. 


INDEX 


423 


South  African  war,  cost  of,  to  British 
Government,  241. 

South  Street,  decadence  of,  322. 

Southern  merchants,  action  in  1861, 330. 

Spain,  effect  of  war  with,  153. 

Spanish-American  war,  absorption  of 
capital  in,  241. 

Spanish  war  loan,  154. 

Spaulding,  E.  G.,  connection  with  first 
greenback  issue,  120;  prepares  bank 
currency  bill,  121 ;  supports  bill  in 
House,  125;  recommends  change  of 
system  after  close  of  the  war,  12  . 

Speculation,  outburst  of,  in  April,  1901, 
163;  causes  Northern  Pacific  corner, 
166;  spectacular  development  of,  in 
I9°5.  175;  development  of,  in  1902, 
232;  origins  of,  261;  evolution  of, 
265;  purpose  of,  267;  hazards  of,  in 
early  times,  273;  methods  of,  in  1848, 
281 ;  violence  of,  during  Civil  War,  288, 

Speyer  &  Co.,  development  of,  98; 
subscribe  for  government  bonds,  127. 

Spinner,  Francis  E.,  Treasurer  of  the 
United  States,  46. 

Spreckles,  Claus,  enters  field  of  sugar 
refining,  201 . 

Stadt  Theatre,  early  history  of,  359. 

Standard  Oil  Co.,  prosecution  of,  184; 
fined  by  Judge  Landis,  185;  develop- 
ment of,  193;  export  business  of,  195; 
dissolution  of,  196. 

State  banks,  at  beginning  of  Civil  War, 
68;  development  of,  after  1897,  236. 

State  debts,  effect  of  Federal  assumption, 
262. 

Staten  Island,  changes  in  character  of, 

3H- 

Steel  construction,  development  of,  353. 

Steiger,  Ernest,  prepares  periodical  ex- 
hibit for  Vienna  Exposition,  384. 

Steinway,  William,  business  career  of, 
348. 

Stevens,  John  A.,  residence  of,  316. 

Stevens,  Mrs.  Paran,  widowhood  of,  365. 

Stewart,  A.  T.,  career  of,  318. 

Stillman,  James,  career  of,  85. 

Stimson,  Henry  L.,  career  of,  44. 

Stock  Exchange,  New  York,  increase  of 
transactions  on,  in  1901,  163;  history 
of,  261 ;  agreement  of  brokers  in  1792, 
264;  constitution  of  1820,  271; 
organization  of,  in  early  times,  272; 
rents  rooms  in  Wall  Street,  275; 
transactions  quoted  in  press,  277; 
moves  to  Howard's  Hotel,  279;  meth- 
ods of  early  trading,  280;  quali- 
fications for,  in  1848,  281;  condition 
of,  in  panic  of  1857,  285;  development 
of,  after  1861,  286;  character  of,  in 
1861, 287;  night  exchanges  started  dur- 


ing Civil  War,  288;  change  in  organiz- 
ation of,  in  1869,  289;  effect  of  Chicago 
and  Boston  fires,  292;  establishes 
system  of  stock  clearings,  293;  effect 
of  President  Cleveland's  Venezuelan 
message,  294 ;  epoch  of  consolidations, 
295 ;  influence  of  Northern  Pacific  cor- 
ner, 296;  fluctuations  in  price  of  seats, 
297;  changes  in  machinery  of,  299; 
new  building  in  1903,  300;  rules  of, 
301;  prominent  members  of,  305; 
bond  dealings  on,  306;  character  as  a 
test  of  values,  309;    methods  of,  369. 

Stock  exchanges,  extent  of,  in  United 
States,  303. 

Stock  transfer  tax,  collections  in  1906, 
270. 

Storrs,  Richard  S.,  preaches  in  Brooklyn, 

3i3- 
Stranahan,  J.  S.  T.,  residence  in  South 

Brooklyn,  313. 
Straus,  Isidor,  supports  sound  money  in 

Congress,  138;  member  of  Committee 

on  Currency  Reform,  144;   career  of, 

326. 
Straus,  Oscar,  character  of,  325. 
Stuart,    R.    L.    &.    A.,    develop    sugar 

business,  342. 
Sturgis,   Frank   K.,   member  of   Stock 

Exchange,  305. 
Stuyvesant,     Peter,      Dutch     director- 
general,  5. 
Stuyvesant   Square,   old   residences   in, 

316. 
Sugar,  decline  in  price  of,  204;    early 

American  market  for,  341;    German 

refiners,  342. 
Sulzer,  William,  elected  governor,  45. 
Suspension  of  specie  payments  in  1861, 

118. 
Susquehanna  River,  takes  rise  in  New 

York,  2. 

T 

Taber,   Charles  C,  business  career  of, 

351- 
Tammany  Hall,  supports  Van  Buren,  24, 
Taylor,  John   W.,   elected    Speaker   of 

National  House,  24. 
Taylor,  Moses,  business  career  of,  341. 
Taylor's  Saloon,  patronized  by  ladies, 

317- 

Taxation,  increase  recommended  by 
Chamber  of  Commerce  in  1862,  119. 

Tea  duty,  protest  against,  17. 

Telegraph,  influence  in  causing  panic,  67 ; 
relations  to  the  stock  market,  106; 
application  to  Stock  Exchange  oper- 
ations, 288. 

Telephone,  utility  of,  to  big  men,  106, 
origins  of,  347. 


424 


INDEX 


Terminal  facilities,  development  of,  104. 

Terry,  John  T.,  career  of,  343. 

Thomas,  R.  H.,  president  of  Stock 
Exchange,  306. 

Thomas,  Theodore,  director  of  American 
Opera  Co.,  344. 

Thompson,  John,  publishes  Bank  Note 
Detector,  366. 

Throop,  Enos,  elected  governor,  27. 

Thurber,  H.  K.,  business  career  of,  344. 

Tilden,  Samuel  J.,  attacks  canal  ring,  36; 
nominated  for  President,  36;  resi- 
dence of,  316. 

Titanic, loss  of  Benjamin  Guggenheim  on, 
214. 

Tobacco  industry,  report  of  Com- 
missioner of  Corporations  on,  206. 

Tompkins,  Daniel  D.,  defeats  Clinton 
for  President,  21. 

Tontine  Coffee  House,  used  for  stock 
transactions,  268. 

Tracey,  Charles,  defends  sound  money 
in  Congress,  138. 

Transportation  system,  development  of, 
61. 

Transvaal  Republic,  declares  war  on 
England,  155. 

Treasury  certificates,  issued  in  1907,  255. 

Treasury  Department,  increases  deposits 
in  banks  in  1907,  246;  offers  Canal 
bonds  and  Treasury  certificates,  252. 

Treasury  notes,  authorized  by  House 
bill,  122;  opposed  by  New  York 
bankers,  123;  urged  by  Secretary 
Chase,  124;  authorized  by  Congress, 
125;   effect  on  public  credit,  126. 

Treasury  system,  adopted  under  Van 
Buren,  114. 

Trust  companies,  origin  of,  91;    friction 
with  national  and  state  banks,  98 
increased    reserve    requirements,    99 
re-entry    into    Clearing    House,    100 
changes  in  organization,  101 ;  develop- 
ment of,  after  1897,  236. 

Trust  Co.  of  America,  subjected  to 
heavy  run,  245. 

Trusts,  origin  of,  192. 

U 

Underwriting  syndicates,  connection 
with  insurance  companies,  178. 

"Undigested  securities,"  term  invented 
by  J.  Pierpont  Morgan,  296. 

Union  Club,  early  location  of,  312. 

Union  Pacific  Railroad,  development  of, 
86;  grants  wide  powers  to  Edward 
H.  Harriman,  166. 

Union  Tobacco  Co.,  acquired  by  Ameri- 
can Tobacco  Co.,  208;  character  of, 

222. 


Union  Trust  Co.,  suspension  of,  in  1873, 
3.71- 

United  Cigar  Stores  Co.,  relation  to 
American  Tobacco  Co.,  211. 

United  Drygoods  Companies,  organiza- 
tion of,  223. 

United  Lead  Co.,  relations  with  Ameri- 
can Smelting  Co.,  215. 

United  Metals  Selling  Co.,  acquired  by 
Amalgamated  Copper  Co.,  205. 

United  States,  value  of  security  issues 
in,  230. 

United  States  Bank,  fails  to  control 
commercial  credit,  64;  recommended 
by  Hamilton,  112;  office  of  New  York 
branch,  274. 

United  States  Steel  Corporation,  organi- 
zation of,  by  J.  Pierpont  Morgan,  162 ; 
suspends  dividends  on  common  stock , 
169;  origins  of,  215;  preferred  stock 
conversion  ,217;  capitalization  of ,  2 1 8 ; 
management  of,  220;  relation  of 
Carnegie  with,  221;  decline  of  com- 
mon stock  in  1903,  232. 

Unlisted  securities,  permitted  on  Stock 
Exchange,  293. 

V 

Valuation  of  State,  in  1909,  49. 

Van  Buren,  Martin,  career  of,  24; 
blamed  by  supporters  of  Crawford,  26 ; 
elected  President,  27;  secures  adop- 
tion of  sub-Treasury  system,  114. 

Van  Cortlandt,  Pierre,  chosen  lieutenant 
governor,  18. 

Van  Dyck,  Assistant  Treasurer,  128. 

Van  Hoffmann,  early  methods  of,  372. 

Van  Twiller,  Governor,  brings  first 
schoolmaster  from  Holland,  46. 

Van  Wyck,  Cobbe  &  Townsend,  busi- 
ness career  of,  339. 

Vanderbilt,  Commodore,  small  fortune 
of,  in  1845,  66;  seeks  to  develop 
Hudson  River  Railroad,  69;  share  in 
speculation,  291. 

Vanderlip,  Frank  A.,  vice-president 
National  City  Bank,  86;  member  of 
Committee  on  Currency  Reform,  144. 

Venezuelan  message,  effect  of,  on  stock 
market,  294. 

Vietor,  Frederick,  career  of,  335. 

Volunteer  firemen,  364. 

Vreeland,  Edward  B.,  aids  in  framing 
currency  law,  146. 

W 

Wall  Street,  early  connection  with  stock 
transactions,  268;  begins  to  figure  in 
the  press,  273;  referred  to  in  diary  of 
Philip  Hone,  275. 


INDEX 


425 


Wallack,  Lester,  gives  English  plays,  359. 
Warburg,  Paul  M.,  part  played  in  New 

York  finance,  96. 
Washington     lla.ll,    sessions    of    Stock 

Exchange  in,  271. 
Washington  Place,  early  associations  of, 

359- 
Washington  Square,  old  residences  in, 

316. 
Waterways,  growth  and  cost,  24. 
Webb,    Silas    D.,    becomes    president 

China  &  Japan  Trading  Co.,  102. 
Weed,     Thurlow,     political    power    at 

Albany,  26. 
Wesendonck,  Otto,  career  of,  333. 
West  India  Co.,  builds  Fort  Orange,  4. 
Westminster,  Treaty  of,  7. 
Wharton,  Edith,  literary  character  of, 

401. 
Wheat  crop,  in  1897,  149;  large  yield  of, 

in  1906,  170. 
Wheat,  high  price  of,  in  1898,  154. 
Wheeler,    William    A.,    nominated    for 

Vice-President,  36. 
Wheelock,  William  A.,  supports  payment 

of  public  debt  in  coin,  125. 
Whiskey  trust,  effort  to  influence  prices, 

225. 
White,    Horace,    report   on    Stock   Ex- 
change, 300. 
White,  Horace,  becomes  governor,  44. 
White,  S.  V.,    corner    in    Lackawanna, 

293- 
Whitney,  William  C,  career  of,  83;    re- 


moves   opposition    to    Cleveland     in 

1892,  134;    becomes  factor  in  tobacco 

business,  208. 
Widener,   P.  A.  B.,  becomes  factor   in 

tobacco  business,  208. 
Wild-cat  banking,  methods  of,  367. 
Williams,  George  G.,  career  of,  369. 
Willis,  Nathaniel  Parker,  characteristics 

of,  394- 
Wilmerding,     Christian     W.,     business 

career  of,  338. 
Wilson,     Woodrow,     receives     vote    of 

New  York,  46. 
Witthaus,  R.  A.  &.  G.,  origin  of,  323 
Woerishoffer,  C.  F.,  bear  operations  of, 

293- 

Wood,  Fernando,  proposes  secession  of 

New  York,  330. 
Woolworth,  Frederick  W.,  career  of,  356. 
Woolwortb  Building,  features  of,  355. 
World's  Fair  of  1853,  347. 
Wright,  Silas,  career  of,  29;    relations 

with  President  Polk,  31. 


Yiddish  Theatre,  origin  of,  359. 

York,  Duke  of,  blockades  the  Hudson,  6. 


Zouaves,  formed  by  Colonel  Ellsworth, 
364- 


A* 


r 


>. 


i 


SU^' 


